Indian Economy Notes Book

Indian Economy on the Eve of Independence
1
British Rule in India from 23 June 1757 to 15 August 1947. The foundatioin
of British Rule in India was laid by Battle of Plassey, fought in 1757. It is
a victory of British East India Company. Over the Nawab of Bengal (Siraj
ud-Daulah) and his french allies on 23 June 1757 under the leadership of
Robert clive.
The basic purpose of the British Colonial Rule over India was to use
the resources of India for the development of Britain in the process of
industrialisation.
They supplied raw-material from India to Britain for the betterment and
advancement of their home country.
They serve Indian economy as a feeder economy due to this India's natural
as well as human resources badly damaged.
Colonial Rule
The policy or practice of a country (wealthy or powerful) maintaining or
extending its control over other countries for the purpose of exploting
resources of dominated country and development of ruling country.
Backward Economy
Backward economy is the economy which is characterised by low standard
of living, poor health services, high death rates, high birth rates, low per
capita income and majority of populatioin is depending on agriculture for
subsistence.
Developing Economy
A country with a relatively low industrial base and depending on
agriculture reduced. Their per capita income is rising and in terms of
transformation from agriculture sector to industrial and service sector.
This is also called less developed economy.
Stagnant Economy
A country having slow growth rate or no growth rate is considered as a
stagnant economy.
Vibrant Economy
A vibrant economy is characterised by dynamic changes in terms of
emerging role of technology in the process of production also. Productioin
is more market oriented and profit motive.
Before the Advent of British Rule, Indian economy was characterised
with the following features:
(i) Prosperous economy: Country was independent no dependence on
foreign countries for survival, self reliant and prosperous economy.
(5)
6 EConomics
(ii) India was rich in terms of food grain (Rice, Wheat, Maize, Pulses and
other food crops).
(iii) Agrarian economy: Majority of population engaged in agriculture
for their livelihood around two-third population.
(iv) Well known Hindicraft industries: India was well known for its
handicraft industries. They were popular in fields of cotton and silk
textiles, metal and precious stone works, etc. Many craftsman getting
employment due to those handicraft industries. Export of handicarft
products was high. It enjoyed a worldwide market due to its reputation
of fine quality of material used and the high standards of craftmanship.
State of Indian Economys
Different sectors on the eve of independence.
(i) Agricultural sector
(ii) Industrial sector
(iii) India foreign trade
(iv) Demographic condition
(v) Occupatioinal structure
(vi) Economic & social infrastructure
(I) Agricultural Sector
Majority of people engaged in agriculture still India was not self sufficient
in food and raw material for Indian industries. India was backward in
agricultural sector on the eve of independence. Here are the following
reasons.
(i) Land Settlement System: Under this system British Govt. set a
triangular relationsip among the govt. owner of the soil and tiller of the
soil. This was popularly known as Zamindari system of land revenue.
According to this system Zamindar’s were recognised the owner of the
soil. They have to pay a fixed sum of the Govt. as land Revennue, and
they are free to extract as much from the Tiller of the Soil (Peasants).
The main interest of zamindards was to collect lagaan regardless the
economic condition of cultivator. Both the Zamindar’s & colonial Govt.
did nothing to improve agriculture sector as well as the conditiion of
farmers.
This Zamindari system is the main reason for stagnation in agricultural
sector during British Rule.
(ii) Commercialization of Agriculture: It refers to a shift from cultivation
for self consumption to cultivation for market. Farmers were forced to
shift to cash crops from food crops. They are offered high price for cotton
or jute because they are required by Britishers for British industries.
Peasants purchase their food requirement from shops in towns and this
fall in production of food crops was responsible for frequent famines in
India during British days.
Indian Economy on the Eve of Independence 7
(iii) Low level of Productivity: It means output per hectare of land

was extremely low. India’s productivity was very low despite large area
under cultivation. Low levels of technology, lack of fertilizers and lack of
irrigation facilities leads to low level of 2productivity during British Rule.
(iv) Scarcity of Investment: There was no investments made by any
one in agricultural sector farmers depends upon rainfall. There were no
irrigation facilties and no technology used in agriculture this leads to
scarcity of investment and many farmers changed their cropping pattern
from food crops to commercial crops.
II. Industrial Sector
Before the advent of British Rule India was particularly well known for its
handicraft industries but British Rule exploit our industries.
These following points explains how Britisher’s exploit our world famous
handicraft industries. They transformed the country in to a supplier
of raw materials and consumers of finished industrial products from
Britain.
(i) Decline in handicraft industry: The primary motive of Britisher’s is
to get raw materials from India at cheaper price and bring finished goods
from Britain. They want to promote Britain finished goods in India and
want to exploit handicraft. They made a discriminatory tariff policy. This
policy allowed free export of raw materials from India and free import of
final goods of British industry to India. But heavy duty was imposed on the
export of Indian handicrafts. This leads to decline of Indian handicrafts,
both in the domestic market as well as the export market.
(ii) Adverse effects of decline of Handicraft Industry:
(a) High level of unemployment: declined in handicraft industry leads to
unemployment on a mass scale. People shift to agriculture and there was
over-crowding in agriculture.
(b) Import of finished goods: Indian made products are high priced hence
it could not stand in front of British low priced goods. This encouraged
the import of manufactured goods from Britain.
(iii) Lack of capital goods industries: There was hardly any capital
goods industries to promote industrialisation in India. Capital goods like
Machineries, tools etc. Which are used in manufacturing of other goods.
Britishers wants Indian dependency on Britain goods so they did noting
to improve industralisation in India.
(iv) Low Contrinbution to GDP: due to lack of industrilisatiion in India
its contribution to GDP was very low.
(v) Limited Role of Public Sector: There was a limited role of public
sector this leads to backwardness of industrial sector. The public sector
operates only railways, power generation, communications, ports and
few other departmental undertakings.
8 EConomics
III. Foreign Trade

Before advent of British Role India export handicraft to all over the world
at that time India was a well known exporter of finished goods (such as
fine cotton, silk , textiles, iron goods, wooden goods and precious stones).
But the British Rule in India converted India into a net exporter of raw
material and importer of finished goods.
State of India foreign Trade during eve of independence as follows.
(i) Exporter of Primary products and importer of finished goods: owing
to colonial exploitatioin India became on exporter of raw silk, cotton,
wool, sugar, indigo, jute, etc. and importer of finished goods produced by
the British industry.
(ii) Monopoly control of India’s foreign trade: Britishers have monopoly
control on the export & import of India.
Suez canal built in 1859 and completed in 1869 which connects
mediterranean sea and red sea by Egypt govt. It helps Britishers to take
more raw-materials from India at low cost to Britain. The canal provides
a direct route for ships operating between Britain and India due to this
nearly 50% of India’s foreign Trade was restricted to Britain and rest was
allowed to China, Srilanka and Iran.
(iii) Drain of export surplus during British Rule: as we all know due
to discrimnatory Tariff policy India became exporter of primary product
and importer of finished goods. This leads to generate export surplus but
these funds are used by Britishers to set up colonial government, to meet
expense on war fought by British govt. and to import invisible items.
Export surplus was not used as investment for future growth this also
leads to backward of Indian economy.
IV. Demographic Condition:
Demographic condition of India was very bad. Year 1921 was known
as year of great divide. Before 1921, The population was not stable,
sometimes it increased and at other times it decreased. Hence after
this year there has been considerable and continuous increase in the
population 1st official census was conducted in year 1881. It was carried
out after every 10 year last census was in 2011.
The following points shows the demographic condition of India on the eve
of independence.
(i) High Birth Rate & Death Rate: Birth rate refers to number of children
born per thousand in a year. Death rate refers to number of people dying
per thousand persons in a year. Both birth and death rate were very high
nearly 48 and 40 per thousand respectively.
Current Birth Rate 19 per thousand (2016)
Current Death Rate 7 per thousand (2016)
Current Population growth rate 1.19% (2016)
(ii) Low literacy rate: Literacy rate was less than 16% out of which
female literacy rate was 7%.
Indian Economy on the Eve of Independence 9
Current literacy rate 74.04% of which male literacy rate is 82.14% and
female literacy rate is 64.46%. Overall literacy rate high in Tripura as
94.65% and lowest in Bihar 63.82%.
(iii) Low life expectancy: There was no medical facilities, poor health
condition continuous famines leads to low life expectancy i.e. 44 years.
Presently it is 68 years.
(iv) High infant mortality rate: It refers to number of deaths of children
before attaining the age of one year in every 1000 live births in a year.
Due to lack of immunization and poor health facilities of women. It was
low as 218 per thousand. Currently it is 44 per thousand.
V. Occupational Structure
It refers to distribution of working population across primary, secondary
and tertiary sectors of the economy.
In 1951
(i) Primary sector 72.7
(ii) Secondary sector 10.1
(iii) Tertiary sector 17.2
(i) Dependency on Agriculture: nearly 75% of work in population
engaged in agriculture sector rest 25% engaged in manufacturing and
service sector.
(ii) Unbalanced growth: Growth is said to be balanced when all sectors
of the economy are equally developed. In India there is predominance in
Agriculture sector only.
(iii) Regional variation: Few states of Tamilnadu, Andhra Pradesh,
Kerala, Karnataka, Maharashtra and West Bengal witnessed a decline
in dependence of workforce on the agriculture sector and shift to
manufacturing and service sector. However states such as Odisha,
Rajasthan and Punjab remains work in agriculture sector.
VI. Infrastructure
Infrastructure refers to basic systems and services that a country needs
in order to function properly like, roads, airports, railways, energy,
utilities, communication, education, healthcare and social. It is not
denying the fact that there was some infrastructural development in the
areaof transport and communication.
Railways: Railways of course, was a major development by Britishers
but for the benefit of Britain. Railway introduced in 1850 and 1st train
from Mumbai (Boree Bunder) to thane 33.8 km in 57 minutes on 16th
April, 1853.
After commercialisation of agriculture they need to collect raw material
from rural villages and send it to Britain. So railways introduced it broke
geographical and cultural barriers. It is also true that construction of
railways led to huge economic losses to the Indian economy.
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Impact of Railways in India:

1. Railways help people to break the barriers of distance and undertake
long journeys.
2. Helps in long distance movement of goods.
3. It facilitated expansion of the market. Thus led to rise in export and
import.
(ii) Communication: Posts and telegraphs were the most popular means
of communication. Electric telegraph used in India to maintain law and
order. Postal services are basically used for public purpose.
*Positive Contributions of British Rule:
1. Self sufficiency in food grain production: Due to commercialisation
in agriculture peasants produce goods for sale it leads to more output.
2. Better means of transportation: Development of roadways and
railways gives a better means of transportation to Indians it opens a
growth opportunity also.
3. Shift to monetary economy: British rule helped Indian economy to
shift from barter system to monetary system.
4. Check on famines: Due to good transportation facilities foods are
supplied to the affected areas in case of draughts.
5. Effective administrative set up: They had an effective administratioin
set up which they left as a legacy. It helps our politicians and planners.
Indian Economy (1950-1990)
2
After independence there is need to Reconstruct the Indian economy.
Therefore, the most important Task before the government of India was
to decide the Type of “Economy system” which would be most suitable for
India.
Economic system refers to an arrangement by which central problems of an
economy are solved.
There are three central problems of an economy:
What to produce? It is the problem related to selection of goods and
(i)
services. What good and services are to be produced? In what quantity?
With the help of limited amount of resources.
How to poduce? It is the problem related to selection of technique of
(ii)
poduction. In labour intensive used of labour is more whereas in capital
intensive more capital is used.
For whom to produce? It is the problem related to Distribution of goods
(iii)
and services. Poducer should offer high quality products at high price to
rich sectors and low quality products at reasonable price to poor sector.
Types of Economy
Capital Economy (Market Economy): It is a type of economy where
(i)
the Decision Related to what to produce, how to produce and for whom
to produce are taken by private producers according to market forces of
demand & supply with the objective of profit maximisation.
Socialist Economy: Here the decision related to what to produce, how
(ii)
to produce and for whom to produce are taken by government with the
objective of Social welfare.
Mixed Economy: Here the decision related to what to produce, how to
(iii)
produce and for whom to produce are taken by both private owners &
government with the objective of profit maximisation & social welfare.
India is adopting mixed economy whereas Hong Kong, Singapore,
Netherlands, Sweden, US are adopting Capitalist Economy.
* Economic Planning
Economic planning means utilistion of country’s resources in different
development activities in all over the country.
To make economic planning effective, the goverment of India set up Planning
Commission in 1950. It has a fixed Planning Period of 5 years i.e. “Five
Years Plans.”
Prime Minister is the Chairman of Planning Commission.
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6 Indian Economic Development
Objectives of Planning Commission to promote a rapid rise in the standard

of living of people, increasing production and offering opportunities to all for
employment in different sector of the economy.
First five year plan launched in 1951. Whereas Planning Commission formed
in March 1950.
1st five year plan 1st April 1951 to 31st March,1956.
12th five year plan (2012-17) was India’s last five year plan.
Plan which is to be achieved over a period of Twenty years is called ‘Perspective
Plan’.
Now, NITI Ayog was replaced the Planning Commission National Institution
of Transforming India formed on 1st Jan. 2015.
Long Term Goals of Five Year Plan
(i) Growth: Growth refers to increase in the production capacity of the
country. So that more goods and services can be produced.
The aim of the govt. is to increase in GDP (Gross domestic product). It
leads to increase in per Capita GDP (availability of goods and services per
person).
GDP is considered as a welfare by increase in GDP welfare of people can
be raised. It also leads to increase in distribution of income.
GDP refers to the market value of all final goods and services produced
in an economy during a fiscal year.
GDP can be increased by improving production capacity, efficient
utilisation of resources, innovative technology, improvement in
infrastructure like Transport, Banking, insurance, communication etc.
Government also promote saving and investment.
(ii) Full Employment: Unemployment is another problem of our economy.
So reduction in unemployment is another objective. Country wants to
attain a situation of full employment.
It is a situation where people are willing to work and able to work they get
work. Without the development of people of a country, growth of economy
is not possible. Focus of government is to reduce both rural and urban
employment. This is an extremely important social objective of planning.
It also reduce the inequalities of income and wealth.
(iii) Modernisation: Modernisation is necessary for improving living standard
of people. Updation of new techology helps in growth process.
Modern age is the age of science and innovations. Green revolution
in Indian agriculture is a well known example of how technology can
transform a country. Modernisation is required in every sector. Technology
in agriculture leads to increase in agricultue produce leads to Attain
Self Sufficiency. Not only in agriculture it requires in transportation,
production, communication, health and insurance, information
technology in education and production process also.
Modernisation also requires change in social outlook, such as gender
empowerment or providing equal rights to women.
INDIAN ECONOMY (1950-1990) 7
(iv) Self-reliance: It means dependence on domesticaly produced goods

particularly on food grains. During British period India was depending
on Britain for finished goods but in five year plans. Many steps are taken
by government to reduce dependency on foreign countries. Through
self sufficiency government can use domestic resources in production
process, provides employment opportunity, reduce foreign interference.
(v) Equity: Economic growth would become a meaningless exercise if the
benefits it accrue to only a handful of people in the society.
It refers to give the benefits of economic prosperity to all sections of the
society living standard of all people should rise.
Equity aims to provide basic needs (food, cloth shelter, education and
health care) to every sections of the society through this the aim of
government is to reduce the inequalities of distribution of wealth.
Here we are taking about equitable distribution not equal distribution.
Equal distribution would mean every individual in the society get the
same share in the country’s National income. It would simply mean that
Doctors, Clerk and every staff gets same salary. This is not possible. Here
we are taking about equitable distribution it means differneces in income
are allowed but within certain limits. Equitable distributioin leads to
development of whole economy.
* Features of Agriculture during 1950-1990
(i) Low level of productivity: Productivity per hectare of land in India
was very low, due to exploitation of farmers in Colinal rule and lack of
technology.
(ii) Depending on Rainfall: In India mostly farmers depended on rainfall.
There was no permanent irrigation facilities (wells and canals).This also
a cause of poor performance in agriculture.
(iii) Disguised unemployment: It is a kind of unemployment in which there
are people who are visibly employed but are actually unemployed. This
situation is also known as Hidden unemployment in such situation more
people are engaged in a work than required. It was high in agriculture
during 1950-1990.
(iv) Subsistence farming: It occurs when farmers grow food crops to feed
themselves and their families. There was no intention to sell those is
market.
(v) Conflicts between owner of the soil (Landlords) and Tenant of the
Soil (Tillers): In British raj due to Zamidari system the condition of
farmers was very poor. Landlords used to extract huge amount of interest
from farmers. In five year plan government tries to remove the conflicts
between owner and Tiller of the soil.
(vi) Fragmented Landholding: Farmers have land but in scattered pieces
in different area out of these few lands were uneconomic due to this
agriculture output was low.
* These are the following measures taken by government to promote

growth in agricultue.
1. Land Reforms
Land reforms involves the changing of laws, regulations or customs
regarding land ownership.
In any country, the basic of all economic activity is the land.
In India majority of its population depending on agriculture so there is a
great need for land reforms in India.
These are the following steps taken by the government with regard
to land reforms or institutional reforms.
(i) Abolition of intermediaries: Indian government took various steps to
abolish intermediaries or Zamindar’s and to make tillers, the owners
of land. This has been done with a view to stopping exploitation of the
cultivators by the Zamindars. This leads to increase in output and growth
in agriculture. But even after getting the ownership of land, the poorest
of the agriculture labourers did not benefit from land reforms.
(ii) Regulation of rent: Condition of farmers was very bad due to excessive
and illegal extortions from them in form of rent. So in land reforms rent
have been fixed generally, there is a rule that rent can not be exceed
1/3rd of the value of crop.
(iii) Land ceiling: It refers to fixing the limit of land that any one can owned.
Beyond these specity limit, all lands belong to a particular person would
be taken by the government and alloted the same to landless farmers.
The main aim behind land ceiling is to promote equity so that every
farmer can improved and contribution to agriculture also increased.
(iv) Consolidation of Holdings: People have land but in scattered places. So
government tries to consolidation of holdings and provide them land in
one place.
(v) Co-operative farming: Co-operative farming is encouraged to further
consolidate the gains of consolidation of holdings. This would help small
holders.
Land reforms were successful in Kerala and West bengal because
governments of these states were committed to the policy of land reforms.
Where as other states did not have the same level of commitment.
2. Technical Reforms (Green revolution)
The new agriculture strategy was adopted in India during the third
five year plan i.e. during 1960’s. The Traditional agricultural practices
followed in India were replaced by Modern Technology and Agriculture
Practices.
The aim to raise the agriculture produce through modern inputs and
technology.
These are the following steps taken by the govt. to upgrade the level
of technology in Indian agriculture:
(i) Use of HYV (High Yielding Variety) Seeds: High yielding variety seeds
have replaced the conventional seeds due to HYV seeds relating to wheat,
bajra, rise, jawar, maize and cotton. Productivity rise an organisation is
formed to promote the growth and distribution of HYV seeds. i.e. National
Seeds Corporation.
(ii) Use of chemical fertilizers: To increase producivity government promote
use of chemical fertilizers.
(iii) Use of insecticides and pesticides: To protect the crops against
diseases and insects. Various insecticides and pesticides are introduced,
integrated pest management programme was adopted along with the
adoption of HYV seeds.
(iv) Scientific farm management practices: More focus is on scientific
cultivation instead of conventional method of farming. Scientific methods
are used for selection of crops, quality of seeds, preparation of soil, use
of fertilizers, dry farming practices, etc.
(v) Mechanised means of cultivation: Introduction of machinery in
agriculture like Tractors and Tubewell, government help small farmers
so that they can buy these machineries through commercial banks.
* Important effects of Green Revolution:
(i) Attaining marketable surplus: Now farmers can sell their excess
agriculture produce in market after meeting their own consumption
requirement.
(ii) Buffer stock of food grains: The green revolution enables the government
to procure sufficient amount of food grains to build a stock which could
be used in times of food shortage.
(iii) Benefit to low-income groups: Due to large scale selling of food grain
in market its pricing goes down. Now low income group people can easily
buy food grain for their family consumption. Who earlier spend large
portion of their income on food grains.
(iv) Rise in productivity: A substantial rise in foodgrain production due to
green revolution reforms and use of technology in agriculture.
Industrial Development
Besides agriculture sector industrial sector also provides the job
opportunities to the people of country. So it was necessary to develop the
industrial sector. At the time of independence industries were limited. The
cotton textile and jute industries were mostly developed in India. There
was only two well-managed iron and steel firms : one in Jamshedpur and
the other in Kolkata.
Role of Public Sector in Industrial Development

(i) Lack of Capital in Private Sector: Except Tatas & Birla most of private
sector companies have lack of capital. Lack of investment in industrial
sector leads to unemployment and low GDP of the economy.
(ii) Employment Creation: Public sector is playing an important role in
generating employment in the country public sector employment are of
two categories.
(a) employment in government administration, defence and other
government services.
(b) employment in public sector economic enterprises of both centre,
state and local bodies.
(iii) Strong Infrastucture: Without the development of infrastrctural
facilities, economic development is impossible. Public sector investment
on infrastructure sector like power, transportation, communication,
basic, and heavy industries, irrigation, education and technical training
etc. These all are necessary for economic development and these all
are contributed by public sector. Private sector investments are also
depending on these infrastructural facilities developed by public sector
of the country.
(iv) Generation of Income: Public sector in India has been playing a definite
positive role in generation of income in the economy.
(v) Obective of Social Welfare: The objective of equity and social welfare
of the government could be achieved only through direct participation of
the state in the process of Industrialisation.
Industrial Policy Resolution 1956 (IPR 1956)
It is a resolution adopted by the Indian Parliament in April 1956. It was
the first comprehensive statement on industrial development of India.
According to this resolution the objective of the social and economic
policy in India was the establishment of a socialistic pattern of society. It
provided more powers to the government machinery.
Resolution defined three categories of industries:
I. Schedule A
II. Schedule B
III. Schedule C
I. Schedule A: Under this schedule there are 17 industries which are
exclusively owned by the state. Industries like arms and ammunitions,
atomic energy, iron and steel, heavy machinery, mineral oil, coal, aircraft,
oil, railways, shipping etc.
II. Schedule B: Under this schedule there are 12 industries which are state
owned. In which the state would generally set up new enterprises, but
in which private enterprises would be expected only to supplement the
effort of the state industries like fertilizers, aluminium, machine tool,

other mining activities etc.
III. Schedule C: Under this schedule the remaining industries are developed
by the private sector but they have to take license from the government
in order to open new industry or to expand production etc. However now
a days it is easy to obtain license from the government. Government also
provide subsidy and tax benefit to those company who establish their
business in Backward area.
Small Scale Industries (SSI)
These are those industries in which manufacturing, providing services,
productions are done on a small scale. Business of Natkins, tissues,
chocolates, toothpick, water bottles, small toys, papers, pens etc.
Small scale industries play an important role in social and economic
development of India. But investment in small scale industries does not
exceed ` 1 crore.
Role of Small Scale Industry in Indian Economy
(i) Employment Generation: These small scale industries are a major
source of employment in the country. These industries are more labour
intensive due to lack of capital. Hence it generate employment to a large
portion of the workforce after agricutlure.
(ii) Contribution to export: Nearly half of the goods (45-55%) of the goods
that are exported from India are produced by these small enterprises.
So India’s export industry majority relies on these small industries for
their growth and development.
(iii) Welfare of the public: Other than economic reasons, these industies
are also important for the social growth and development of our country.
These industries are usually started by the lower or middle class people.
They have an opportunity to earn wealth and employee other people.
It helps in income distribution.
[Small scale industries must be protected from large and medium scale
industries then only they can survive. So government has taken various
steps to protect them like Tax concessions and reserving few products only
to small scale industries.]
Foreign Trade
Foreign Trade in India includes all imports and exports to and from India.
It is administrated by the Ministry of Commerce and Industry India’s
share in the total World Trade was 1.78% in year 1950.
Trade Policy : Import Substitution
In order to be self reliant in vital sectors, India has followed the strategy
of replacing many imports by domestic production.
Import substitution refers to a policy of replacement or substitution
of imports by domestic production. e.g. industries were encouraged to
manufacture vehicles and cars within India itself, instead of having them
imported from foreign countries.
The government aimed to protect domestic production from foreign
competition using this policy. This will save foreign exchange reserve and
economy will achieve self-reliance.
Government also protect domestic producer’s from Imports through:
(i) Tariffs: These are the Taxes levied on imported goods. The main aim is
to discourage the use of foregin goods. Due to imposing heavy duty on
imported goods. These goods become more expensive and import will
reduce.
(ii) Quotas: It refers to fixing maximum limit on the imports of a commodity
by a domestic producer. It restricts the amount of imports. These results
less imports in our economy and now domestic firms or producers could
expand without the fear of competition from the foreign market.

New Economic Policy (LPG)
3
New economic reforms in India refers to the neo-liberal policies introduced
by the government in 1991 and in the later years.
The central point of the reforms was liberalization of the economy, simplifying
regulations, giving more role to the private sector and opening up of the
economy to competition. The condition of Indian economy was very poor in
1990’s. So new economic policy was a good decision to combat that crises.
REASONS FOR ECONOMIC REFORMS
These are the following reasons which shows why economic reforms in
1991.
(i) Rise in prices: Price rise continuously in India. The inflation rate
increased from 6.7% to 16.7%.
Due to inflation country’s economic position became worse. Main reason
for inflation was rapid increase in money supply. It was due to deficit
financing which means borrowings from Reserve Bank of India by Govt.
to meet its deficit.
RBI provide this loan by printing new currency notes which leads to
increase in money supply.
(ii) Rise in fiscal deficit: Due to increase in government expenditure.
Indian government has to borrow money so there was rise in public debt
and interest. In 1991 interest liability became 36.4% of total government
expenditure. This leads to increase in fiscal deficit.
Fiscal deficit is the difference between total expenditure and total receipts
excluding borrowings.
(iii) Poor performance of public sector: In the 40 years period (1951-
1990), public sector was assigned on important role to work for the
economic deelopment of India. However except few enterprises the overall
performance was very dissappointing. Many public enterprises showing
losses. Then government recognised the need for making necessary
reforms.
(iv) Deficit in Balance of Payment: The difference between total exports
and total imports are negative and this had been rising continuously.
To cover this deficit large amount of foreign loans had to be obtained
so liability of loan and its interest payment goes as increasing. It made
balance of payment adverse.
(v) Fall in foreign exchange reserve: India’s foreign exchange reserve fell
too low in 1990-1991 and it was insufficient to pay for an import bill for
2 weeks. Then Chandershekhar government had to sell gold to meet the
import liability. So government had to think about policy of liberalisation.
(5)
ELEMENT OF NEW ECONOMIC POLICY

1. L-Liberalisation
2. P-Privatisation
3. G-Globalisation
1. Liberalisation
It means end of license and restrictions previously imposed by the
government.
Liberalisation of the Indian industry has taken place with respect to:
• No requirement of license except five industries
• No restriction on expansion of business activities and scale of business.
• Freedom of fixing the price of goods and services.
• Reduction in Tax Rates and lifting of unnecessary controls over the
economy.
• Simplifying procedures for imports and exports.
Impact of Liberalisation on Industrial Sector
(i) Abolition of Industrial Licensing: The new industrial policy abolishes
the system of industrial licensing for most of the industries.
Under this policy no licenses are required for setting up new industrial
units or for expansion of existing units. To begin with, 18 industries
were require licenses. Through later amendment to the policy, this list
was reduced to five. These were liquor, cigarette, defence equipments,
industrial explosives and dangerous chemicals.
(ii) Decrease in role of public sector: The number of industries, exclusively
reserved for the public sector, reduced from 17 to following 3 industries;
(i) Defence equipments; (ii) Atomic enery generation; and (iii) Railway
transport.
(iii) De-reservation under small-scale industries: Under new economic
policy many goods produced by small scale industries have now been
de-reserved. Increased investment limit for small scale industries to one
crore.
(iv) Freedom to Import of Capital Goods: Due to liberalisaion industries
are free to import capital goods for upgrading their technology.
(v) Abolition of Restrictive Trade Practices: According to monopolies and
restrictive trade practices (MRTP) Act 1969, all those companies having
assets worth ` 100 crore or more were called MRTP firms and were
subjected to several restrictions. Now these firm’s have not to obtain
prior approval of the government for taking investment decision. Now
MRTP Act is replaced by the Competition Act 2002.
Impact of Liberalisation on Financial Sector Reforms
(i) Change in Role of RBI: Now Commercial Banks are free to take decisions
on many matters, without consulting RBI. Role of RBI was reduced from
NEW ECONOMIC POLICY (LPG) 7
regulator to facilitator of financial sector. Banks are free to set up new

branches.
(ii) Increase in Private Sector Banks: This policy led to establishment
of private sector banks Indian as well as foreign. It leads to increase
in competition among Commercial Banks. Now people can get better
banking services and lower interest rates.
(iii) Increase in limit of foreign investment: The limit of foreign investment
in Banks was raised to 51%. Many financial institutions, mutual funds
and pension funds were now allowed to invest in Indian financial markets.
Impact of Liberalisation on foreign exchange sector foreign exchange
reforms were initiated in 1991 with the devaluation of the Indian rupee
against foreign currencies.
Devaluation means fall in value of Indian rupee in terms of foreign
currency. Now more Indian rupee is required for one unit of US dollar
or UK pound. This led to increase in inflow of foreign currency in to our
country.
Impact of Liberalisation on Trade & Investment Policy
Before 1991 various restrictions were imposed on import of goods and
services to protect domestic industries but this restriction reduced the
competition among domestic industries and caused slow growth so to
promote domestic industries, government take the following decisions.
(i) Removal of Quantitative Restrictions on Exports & Imports: Under
new economic policy, various quantitative restrictions were removed.
(ii) Removal of Export duties: To promote domestically produced goods in
international market export duties were removed.
(iii) Relaxation in import licensing system: Many import restrictions were
abolished except few industries. This decision was taken to import raw
material at better prices.
2. Privatisation
Privatisation means giving greater role to the private sector and reducing
the role of public sector.
Privatisation can be done in two ways:
(i) Transfer of ownership and management of public sector companies from
the government to private sector.
(ii) Privatisation of the public sctor undertaking (PSU) by selling off part of
the equity of PSUs to the public. This process is called Disinvestment.
3. Globalisation
Globalisation means integrating our economy with world economy.
Before 1991 government of India had followed a strict policy to reduce
the volume of imports these are in form of import licensing, tariff and
taxes, quantitative restrictions etc. in globalisation all these barriers
were removed to promote international trade.
Policy Strategies Promoting Globalisation

These are the following points promotes globalisation of the Indian
economy.
(i) Increase in limit of foreign investment: Foreign Direct investment
share raised to 100% in few sectors without any restrictions introduction
of foreign exchange management act (FEMA).
Foreign capital investment has been raised from 40 to 51%. In few sectors
it reached to 100%.
(ii) Long Term Trade Policy: To promote long term trade policy all the
restrictions and controls on foreign trade have been removed.
Open competition is incouraged. Except some specific goods, most goods
are traded free of restrictions.
(iii) Reduction in Tariffs: Tariff barriers have been withdrawn on most
goods traded between India and rest of the world. It leads to increase in
competition.
(iv) Withdrawl of Quantitative Restriction: Earlier quantitative restrictions
are imposed but it was withdrawn. This is conformity with India’s
commitment to the WTO (World Trade Organisation).
[Outsourcing: Outsourcing is a business practise in which a company hires
another company or an individual to perform tasks or handle operations.
This service include: Call centres, clinical advice, teaching or coaching,
Accountancy, film editing etc. Outsourcing is one of the important outcomes
of the globalisation process. India has become a favourable destination of
outsourcing for most of the MNC’s because of availability of cheap labour
even low wage rate for the skilled workers and a revolutionary growth of
IT industry in India.
BPO (Business process outsorucing is quite popular in India. It is also
called Call centres.)]
WORLD TRADE ORGANISATION (WTO)
The World Trade Organisation is an intergovernmental organisation that
is concerned with the regulation of international trade between nations.
The WTO officially commenced on 1st January 1995 replacing the
General Agreement on Tariffs and Trade (GATT), which commenced in
1948. It is the largest international economic organisation in the world.
Its headquarter is in Geneva, Switzerland and Presently there are 164
member countries of WTO and all the members are required to abide by
laws and policies framed under WTO rules.
The WTO agreemnets cover trade in goods as well as services, to facilitate
international trade.
Functions performed by WTO are:
(i) It helps in international trade through removal of tariff as well as non-
tariff barriers.
(ii) To implement rules and provisions related to Trade Policy.
NEW ECONOMIC POLICY (LPG) 9
(iii) To ensure optimum utilisation of world resources.

(iv) To protect the environment.
(v) To provide a framework for dispute settlement.
An Appraisal of LPG Policies (Merits)
1. Increase in rate of economic growth: The growth in GDP was 5.6%
during 1980-91. During 2018-19 growth in GDP is estimated at 7.2% due
to economic reforms country’s GDP increased. Liberalisation provides
job opportunities and helps to reduce unemployment.
2. Increased in industrial production: LPG policies have worked as a
great stimulant to industrial production in the Indian Economy. Due to
LPG policies Indian IT industry has achieved global recognition.
3. Increase in Foreign Investment: By ending up restrictions on foreign
investors in Economic Reforms govt of India increase its Foreign Direct
Investment (FDI) and foreign institutional investment. It was US $100
million in 1990-91 but in 2014-15 it increased to US $73.5 billion.
Mission “Make in India” has started in September 2014, in which foreign
direct investment policy was further liberalised to increased investment
in Indian economy due to this FDI in India increased by 48%.
4. Rise in Foreign Exchange Reserves: Due to increase in investment,
supply of foreign exchange increased its foreign exchange reserve was US
$6 billion in 1990-91 but in 2014-15 it was US $321 billion. India is one
of the largest foreign exchange holders in the world.
5. Rise in Exports: India’s export increased after New Economic Policy
because many industries were established in India. Who are involved in
export Govt. also provide various facilities to exporters.
6. A check on Inflation: Inflation rate has been reduced due to tax reforms.
7. A check on fiscal deficit: Due to new economic policy government
revenue increased hence there is a less need of borrowings from rest of
the world.
8. Employment opportunieis provide by private sectors: Due to
delicensing policy there is an increase in role of private sector, they
increase their area of production which provides employment to mass
people.
DEMERITS OF LPG POLICIES
1. Neglect of Agriculture: Growth of GDP was seen only in secondary
and tertiary sector. Agriculture sector has suffered a serious neglect and
its growth rate was slow down. Neglect of agricutlure implies spread of
poverty. It also create a hurdle for growth process of industrial sector.
This is because agricutlure is an important source of raw material for the
industrial sector.
2. Neglect rural area in growth process: LPG policies have resulted in

the concentration of growth process in urban areas. All multinatioal
companies are focusing only an urban areas where they find good
infrastructural facilities. This cause the growth of urban sector only and
rural area’s are neglected this is the main reason of migration of people
from urban to rural area.
3. Ineffective Tax Policy: Govt. reduce tax rates so that people will pay their
tax honestly but this policy of Govt. failed. Reduction in tariff decrease
govt. revenue through custom duties. Many tax incentives provided to
foreign investors to attract foreign investment this also reduced govt.
revenues.
4. Spread consumerism: The new economic policy encourages the purchase
of goods and services in increasing amounts. Due to this people spend
more on material items. Aggressive advertisements play a vital role to
promote sale of Dubious goods.
5. Unbalanced growth: We already studied that their is no meaning
of growth if it is unbalanced. Due to LPG policy only few sectors are
developed such as telecommunication, information technology, finance,
entertainment, travel and hospitality services but agricutlure sector and
other industrial sectors are neglected which provide livelihood to millions
of people in the country.

Poverty
4
It is a situation where people are unable to fullfill their basic necessities of
life. Basic necessities include food, clothing, housing, education and health
facilities. If these basic needs are not fulfilled the person is said to be poor.
In simple way we can say that poverty is hunger, poverty is lack of shelter,
poverty is being sick and not being able to see a doctor, poverty is not having
access to school and not knowing how to read and write.
Poverty is not having a job, is fear for future, poverty is losing a child to
illness brought about by unclean water. Poverty is powerlessness, lack of
representation and freedom.
MEASURES OF POVERTY
(i) Relative Poverty
(ii) Absolute Poverty
Relative Poverty
Relative poverty refers to poverty of people, in comparision to other
people, regions or nations.
Relative poverty is also interpreted in terms of inequality of income within
the country. In India 20 percent of low income group of people contribute
only 8% in national income and 20% of high income group of people
contribute 45.3 percent in National income.
e.g. Mohan income is lower as compared to Sohan hence we can say
Mohan is relatively poor.
Absolute Poverty
Absolute poverty is when household income is below a certain level,
which makes it impossible for the person or family to meet basis needs
of life including food, shelter, safe drinking water, education, healthcare
etc. Here people lives below poverty line.
(Poverty line is the level of income to meet the minimum living conditions.
In India (2012) 22% of its population lives below poverty line. In India,
persons who spent `816 on consumption in rural areas and `1000 in
urban areas per month are treated as those below poverty line.
The Planning Commission has defined poverty line on the basis of
recommended nutritional requirements of 2400 calories per person per
day for rural areas and 2100 calories per person per day in urban areas.)
The poverty line divides the poor from the non-poor

Absolutely Very Poor Not so Middle Upper The The Millionaires Billionaires
Poor Poor Poor Class middle rich very
class rich
{
{
(5)
Categorising Poverty
1. Chronic Poor: It includes people who are always poor and those who are
usually poor.
2. Transient Poor: Transient poor may be classified as churning poor (who
regularly move in and out of poverty, like small farmers) and occassionally
poor (who are rich most of the time and poor some times).
3. Never poor: They are never poor.
Five states (Uttarapradesh, Bihar, Madhya Pradesh, West Bengal and
Odisha) account for about 70% of India’s poor. During 1973-74, about half
of the population in most of these large states was living below the poverty
line.)
CAUSE OF POVERTY
(i) Rise in Population: Population has been rising in India at a rapid
speed. This rise in mainly due to fall in death rate and rise in birth rate.
India’s population was 84.63 crores in 1991 and became 137 crores in
2019. This pressure of population proves barrier in the way of economic
growth.
(ii) High level of unemployment: Due to continuous rise in population,
there is chronic unemployment and under employment in India. There
is educated unemployment and disguised unemployment. Poverty is just
the reflectioin of unemployment.
(iii) Poor State of Agriculture: Government make various policies to increase
the productivity but still the agriculture in India shows backwardness
due to this most of the farmers lives below poverty line.
(iv) Lack of Capital: Capital is needed for setting up industry, transport and
other projects. Shortage of capital creates hurdle in development which
makes economy poor.
(v) Low literacy rate: Due to lack of knowledge and skill the weaker sections
of the society have to take up low paid jobs. There is unemployment in
both rural and urban sector.
(vi) Increase in price: The rise in prices has affected the poor badly due to
rise in price poor become more poor.
(vii) Low level of per capita income: The net national income is quite low
as compared to population. Increase in population is more than increase
in national income which reduces the per capita income. Low per capita
income shows low per person income.
(viii) Lack of infrastructure: Lack of infrastructure shows poverty because
people suffers due to low quality of education, health, transport,
communication etc., this low infrastructure stops people in earn more
and growth of the economy.
POVERTY 7
Three Dimensions of Government approach to reduce poverty in India.

1. Growth-oriented Approach: It is based on the expectation that the
effects of economic growth would rapidly increase the gross domestic
product. Increase in GDP leads to increase in per capita GDP it means
availability of goods per person increased and per person income also
increased which helps to reduce poverty.
2. Poverty Alleviation programmes: In the third five year plan, govt.
has introduced a variety of poverty alleviation programmes to reduced
poverty.
3. Minimum Needs Programme: Third approach is to provide minimum
basic amenities to the people. Through this approach, programmes have
supplemented the consumption of the poor, generation of employment
opportunities and improvement in health and education. To improve the
food and nutritional status of the poor, govt. has started mid day meal
scheme.
*Poverty Alleviation Programmes in India
These are refers to tools such as free education, free school meals for
children, debt relief to small farmers, free healthcare facilities to poor
etc. To improve living conditions of the section of society which is
unable to fulfil even the basic necessities of life by the government and
internationally approved organisations.
The main aim of the government behind this programme is to reduce the
unemployment in the economy basically in rural areas. Govt. provides
various employment generation opportunities to poor people. These are
the “self-employment programmes” and “wage employment programmes”
by the government.
*Self-employment Programmes
1. Rural employment Generation Programme (REGP): To promote self
employment in rural areas and small towns, govt. has started this
programme. This was implemented by Khadi and Village industries
commission. Banks are also giving loans to set up small industries.
2. Prime Minister Rozgar Yojna (PMRY): It is being implemented since
1993. The scheme is designed to create and provide sustainable self
employment opportunities to one million educated unemployed youth
in the country during the eighth plan period. Government also provides
financial assistance to set up any kind of enterprise which creates
employment in the economy.
3. Swarna Jayanti Shahri Rozgar Yojna (SJSRY): SJSRY in India is a
centraly sponsored scheme which came into effect on 1st Dec. 1997.
The scheme provide gainful employment to the urban unemployed
and underemployed poor, through encouraging the setting up of self
employment ventures.
This scheme is being implemented on a cost sharing basis between the

centre and the states in the Ratio of 75 : 25. Given the low allcations
for the scheme, only about 2 lakh urban poor under skill development
and 50,000 under self-employment are being benefitted under SJSRY
annually.
4. Swarnajayanti Gram Swarozgar Yojna (SGSY): The aim of this scheme
was to provide employment in rural areas. It promotes micro enterprises
so that they can create employment opportunity in rural areas it is also
funded by the centre and the states in a ratio of 75 : 25 and is implemented
by commercial banks, regional banks and co-operative banks.
The scheme is established to help low-income families (also referred to as
swarozgaris) above the poverty line. The scheme facilitiates the formation
fo self-help groups (SHGs), who will be assisted on a loan-cum-subsidy
basis for undertaking income-generating activities. Under the scheme
half of the groups formed at the block level should be exclusively women
groups.
* Wage Employment Programme
1. Sampoorna Grameen Rozgar Yojna (SGRY): It was a scheme launched
by the Govt. of India to gain the objective of providing gainful employment
for the rural poor. It provides additional and supplementary wage
employment and thereby provide food security and improve nutritional
levels in all rural areas.
Secondary objective of this scheme is to develop social and economic
infrastructure in rural area.
2. National Food for Work Programme (NFFWP): The national food for
work programme (NFFWP) 2004 was launched by Minister of rural
development, Central Govt. on November 14, 2004 in 150 of the most
backward districts of India with the objective of generating supplementary
wage employment about 20 lakh metric ton of food grains and `2020
crore were allocated for the programme during 2004-05. The objective
of the programme was to provide additional resources apart from the
resources available under the Swampoorna Gremeen Rozgar Yojna. The
scheme was 100 percent centrally sponsored.
(MGNREGA: Mahatma Gandhi National Rural Employment Guarantee Act
2005 is an Indian labour law and social security meausre that aims to
guarantee the “right to work”. It also aims to enhance livelihood security
in rural areas by providing at least 100 days of wage employment in a
financial year to every household. In 2013-14, nearly five crore households
got employment opportunities under this law).
(PMJDY: Pradhan Mantri Jan Dhan Yozna is a financial inclusion program
of Govt. of India which is applicable to 20 to 65 years of age group that
aims to expand and make affordable access to financial services such as
bank accounts, insurance and pensions. This was launched by the Prime
Minister of India Narendra Modi on 28 August 2014. He had announced
POVERTY 9
this scheme on his first independence day speech on 15 August 2014.

Government of India stated that people can get benefits of subsidies
directly in to their Bank Account. People also entitled `1,00,000 accident
insurance and `30,000 life insurance cover.)
EVALUATION OF POVERTY ALLEVIATIOIN PROGRAMMES
Positive Aspect
i. There has been a decline in the percentage of population below poverty
line from 55 percent in 1973-74 to 21.9 percent in 2011-12.
ii. Increase in income of poor people due to poverty alleviation programmes
people can earn more wages.
iii. Reduce unemployment in the economy.
Failure of Poverty Alleviation Programmes
i. Definition of ‘poor’ was not clear to many people due to this non poor
people also took advantages of the various schemes.
ii. Due to massive poverty, available resources is not sufficient to reduce
poverty.
iii. People who were living in remote areas are not able to take advantages of
these programme and government has not taken any step to provide any
kind of benefit to them.
iv. Lack of credit institutions, for set up micro industries people need finance
but very few financial institutions were there to help them.
v. PAPs have failed due to inefficient administration, staffs are not
responsible to their duties and there was no one to monitor the follow-up
action.
vi. There was lack of infrastructural facilities, such as roads, schools,
training center, IT, Communication etc. in backward areas which makes
it’s applicatioin difficult.
Human Capital Formation
5
Human Capital is an intangible asset or quality not listed on a Company’s
balance sheet.
It can be classified as the economic value of worker’s experience and skills.
This includes assets like education, training, intelligence, skills, health, and
other things employers value such as loyalty and punctuality.
The concept of human capital recognizes that not all labour is equal. But
employers can improve the quality of that capital by investing in employees.
Similarly a teacher can improve the quality of students by providing them
quality education.
Human capital is not only beneficial to those person who possess it but it
is beneficial for the whole economy. Human Capital is important because it
increase productivity and profitability so that a nation can develop.
A nation must spent time and money to develop the human resources.
Development of human resources means increase in the quality of human
beings, which helps in the process of growth and development of the
economy.
Human Capital Formation
Physical Capital
It implies the non-human assets of an economy, such as plant and
machinery, tools and equipments, office supplies etc. that help in the
process of production.
Physical Capital are generally tangible in nature and can be easily sold
in the market.
These are those asset which can be separated from its owner. These are
depreciated over the time.
Human Capital
It refers to stock of knowledge, talent, skills and abilities of human.
Human capital is intangible and can’t be sold in the market.
Human capital (like skills, knowledge and talent) cannot be separated
from its owner.
It can be improved by continuous investment in health and education.
Sources of Human Capital Formation
1. Expenditure on Education
One of the most important sources of Human Capital formation is
investment done in education. Educatioin transforms a person to live a
better life. Provide education to every children is the primary responsibility
(5)
of their parents, society and the government. By getting education

people can secure their future and can earn more. Education helps them
to grow and they help is the process of development of the economy.
Educated people are the asset of the nation where as uneducated people
are liability of the nation. Government should expand the education
system by improving the quality of education and preparing high budget
for education.
2. Expenditure on Health
Poor countries tends to be unhealthy, and unhealthy countries tend to
be poor. health is a kind of human capital as well as an input producing
other forms of human capital.
A worker who is not well will certainly affect the productivity. Various forms
of health expenditures are, making available clean and safe drinking,
preventive, curative medicine and social medicine etc. Expenditure on
education and health is important to build a strong economy. it also
leads to increase in productivity. GDP of economy also increases.
→ Preventive medicines known as vaccination.
→ Curative medicines are medical intervention during illness.
→ Social medicines, i.e. spread of health literacy.
3. On the Job Training
Expenditure regarding on-the-job training is a source of human capital
formation it enhance the quality of labour and productivity increases.
Firm spend huge amounts on giving on-the-job training to their workers.
It may be in different forms like a worker may be trained in the firm
itself or under the supervision of a skilled worker or can be sent for off
campus training after spend a large amount on training firm insist that
the workers should work for a specific period of time so that firm can
recover the benefits of the enhanced productivity owing to the training. It
also increase the GDP and National Income of the economy.
4. Expenditure on Migration
People migrate from one place to another place to find better jobs in order
to gain the advantage of locatioin and earn higher salaries. Migration from
a rural area to urban area is prime cost. Rural areas don’t have sectors to
provide good employment, so people migrate, due to lack of infrastructure
in rural area standard of living of people may not rise. Hence they move to
urban area, whereas technically qualified professionals (like engineers,
doctors, scientist, etc.) migrate from one country to another.
Migration involves cost:
(i) Cost transport from one place to the other.
(ii) Cost of living in different social environment. But the gains of migration
(higher salaries and high living standards) are greater than the cost of
migration. So, migration leads to human capital formation, through fuller
or better utilisation of skills.
Human Capital Formation 7
5. Expenditure on Information
Expenditure is incurred to acquire information relatiing to job markets
and educational institutons. people can get information about various
types of jobs, salaries in the market, training institutes, educational
institutions, etc.
It enables people to use their potential in a better organisation.
Accordingly expenditure on information is another determinant of human
capital formation.
Human Capital and Human Development
Human Capital and Human development are related concepts, but
there is a clear distinction between them. Human Capital considers
education and health as a means to increase labour productivity. it is a
narrow concept which treats human beings as means to achieve higher
productivity, investment in education and health is unproductive if it
does not enhance output of goods and services.
Human development is the idea based on that education and health are
integral part of human well being because only when people have the
ability to read and write and lead a long and healthy life. It is a broader
concept which considers human beings as ends in themselves. Human
development occurs when majority of people in the economy are educated
and healthy.
Importance or role of human capital formation
Human Capital is the fundamental source of economic growth. It is a
source of both increased productivity and technological advnacement. In
fact, the major difference between the developed and developing countries
is the rate of progress in human capital.
The underdeveloped countries need human capital to staff new and
expanding government services to introduce new systems of land use
and new methods of agriculture, technology in agriculture, to develop
new means of communcation to carry forward industrialization and to
build the educatioin system. We are not get a larger part of economic
growth from investment in men and improvements brought about by
improved men.
Here are few points which elaborate the role of human capital
formation.
1. Raise efficiency and productivity of physical capital
Physical capital becomes more productive if the country possesses
sufficient human capital. Machineries and other industrial equipments
become more productive and can be efficiently utilised due to human
capital. Engineers and other technical skilled workers can certainly
handle the machines and other productive assets in a better way.
2. Bring Positive Change in Work Environment

Human capital formation brings a positive change at work environment
by increasing the capabilities of human beings company also spend large
amount on training of employees and improve their skills, communication
and develop a positive attitude. A more positive environment helps to
yield more economic growth as people become more growth oriented.
3. Raise Equity and Participation in the Society
Human Capital is responsible for economic equality in a soceity. By
enhancing productive capacities of labour forces, human capital formation
increases the rate of participation. Higher the rate of participation, greater
is the degree of economic and social equality in the society. higher rate of
equality brings social justice and also development.
4. Inventions, Innovations and Technological Advancement
Human capital formation stimulates innovations and inventions.
Education provides the knowledge to understand the change in the
society, requirement of technology in different sectors, scientific research,
medical science, which facilitates inventions and innovations.
5. Higher Income and Standard of Living
Human Capital formation generates more jobs according to the capabilities
of human beings and these job opportunities raise the income and improve
living standard of people of a country life expectancy of the people also
raises.
6. Control of Population Growth
It has been observed that educated persons have small families as
compared to uneducated families.
Spread of education is the only way to reduce the growth of population.
It has been seen in Kerala (a highly educated state) having female to
male ratio higher than 0.99. The ratio is 1.084 i.e. 1084 females per 1000
males.
Problem Facing Human Capital Formation in India
1. Rising Population
Rapidly rising population adversely affects the quality of human capital
formation in developing countries. It reduces per capita availability
of existing facilities. A large population requires huge investment in
education and health.
2. Long Term Process
The process of human development is a long term policy because skill
formation takes time.
Human Capital Formation 9
3. Brain Drain
Migration of highly skilled labour termed as “Brain Drain“ adversely
affects the economic development. It leads to the loss of highly skilled and
talented people such as scientists, administrators, executives, engineers,
physicians, educationists, etc.
4. High Regional and Gender Inequality
Regional and gender inequality lowers the human development levels.
5. Insufficient on the job Training in agriculture
Agriculture sector is neglected where the worker’s are not given on-the-
job training to obserb emerging new technologies.
6. High Level of Poverty
A large proportion of the population lives below poverty line and do’nt
have access to basic health and educational facilities. A large section of
society can’t afford to get higher education or expensive medical treatment
for major disease.
Educational Sector in India
India holds an important place in the global education industry. India
has one of the largest network of higher education institutions in the
world. However, there is still a lot of potential for further development in
the education system.
India has the world’s largest population of about 500 million in the age
bracket of 5 - 24 years and this provides a great opportunity for the
education sector.
Government expenditure on education is the important source of human
capital formation in India. The expenditure by the government on
education is expressed in two ways:
1. As a percentage of total government expenditure: It indicates the
importance of education in the scheme of things before the government.
During 1952-2014, it increased from 7.92 to 15.7.
2. As a percentage of gross domestic product: It shows the proportion of
income spent on development of education in the country. During 1952-
2014, it increased from 0.64 to 4.13.
Rural Development 6
Rural development is the process of improving the quality of life, economical and
social conditions of people living in rural areas.
Today, rural development still remains the core of the overall development of the
country.
It has become more than two-third of the Country's people is dependent on
agriculture for their livelihood and one-third of rural India is still below the
poverty line.
So government should take steps to develop the rural area also.
PROCESS OF RURAL DEVELOPMENT
(i) Land reforms: There was a great need for land reforms in a country like
India, where majority of its population still depends on Agriculture.
It includes various rural and regulation of land ownership, abolition of
intermediaries, regulation of rent, land ceiling, etc.
(ii) Development of infrastructure: It involves the development of trans-
portation system, electricity, permanent irrigation facility, credit and
marketing facilities for rural people. without these infrastructural
facilities it is very difficult to develop rural areas.
(iii) Development of human resources: To develop the rural area,
development of human resources is necessary. It includes education and
health. Government should provide education and health facility to every
people of rural area and focus on female literacy.
(iv) Poverty Alleviation Programme: Around 30% of population is still
below the poverty line. So, there is a serious need for taking serious steps
for alleviation of poverty and bringing significant improvement in living
conditions of weaker section.
(v) Development of Productive resources: Government should provide
employment opportunity to the people living in rural areas.
People should be trained for doing activities other than agriculture.
Rural Credit
Growth of rural economy generally depends on the funds required to development
of agriculture and non agriculture activities.
Farmer’s need money for seeds, fertilizers, insecticides, pesticides, etc. even
funds are required for technological advancement.
So rural credit is one of the crucial factor which contribute to agriculture
production.
(5)
2 MACRO ECONOMICS
Sources of Rural Credit

The following two sources of credit area:
(i) Non-institutionals sources
(ii) Institutionals sources
Non-institutionals sources: Agricultural credit given by these sources are called
non-institutionals sources of rural credit. Traditionally farmers are obtaining
loans from these sources.
1. Moneylenders: They are the person whose business is lending money
to farmers and charged high rate of interest they also manipulated their
accounts without their knowledge due to lack of knowledge farmers are
bound to take loan from moneylenders.
2. Relatives: Farmers generally borrow money from their relatives and
return the money after harvest without any interest.
3. Traders and Commission Agents: Traders and commission agents
are also advancing loan to the farmers for productive purposes before
the maturity of crops and then force farmers to sell their crops at very
low prices and charge heavy commission. This type of loans is mostly
advanced for cash crops.
4. Landlords: Small as well as marginal farmers and tenants, take loans
from landlords for meeting their financial requirements landlords also
charge high rate of interest on such loan and exploit them.
Institutional Sources: When credit is given by the Government approved

agencies then such sources of credit is called institutional sources.
Following are some of the important institutional sources of agricultural credit
in India.
1. Co-operative Credit Societies: The cheapest and the best source of
rural credit in India is definately the Co-operative finance.
2. Land development banks: Land development banks are advancing
long term loans for 15-20 years to the farmers against the mortgage
of their lands for its permanent improvement, purchasing agricultural
implements and for repaying old debts.
3. Commercial Banks: In the initial period, the commercial banks of our
country have played a marginal role in advancing rural credit in 1950-
51, only 1 percent of the agricultural credit was advanced by the banks
but after nationalisation of commercial banks in 1969, the commercial
banks started to extend financial support to farmers.
4. Regional Rural Bank: These Banks are operated in rural area where
no banking facilities are available. the aim of these Banks is to provide
credit and other facilities, especially to small and marginal farmers.
5. The Government: The loans provided by the government are known as
taccavi loans and are lent during emergency or distress, like famines,
RURAL DEVELOPMENT 3
floods, etc. The rate of interest charged against such loan is as low as
6%.
Taccavi loan was a short term loan given to poor farmers to purchase
seeds, fertilizers, insecticides, pesticides, etc.
6. National Bank for Agricultural and Rural Development (NABARD): It is
an apex development bank authorised for providing and regulating credit
and other facilities for the promotion and development of agriculture,
small scale industries, cottage and village industries, handicrafts and
other activities in rural areas with a view to promote rural area.
It is established in year 1982.
7. (SHG) Self-help group bank linkages programme for micro
finance: Self-help groups (SHGs) are informal associations of people who
choose to come together to find ways to imrpove their living conditions.
Here people are helping each other.
Self-help group promote thrift in small proportions by a minimum
contribution from each member. From the pooled money, credit is given
to needy members at reasonable interest rates, which is to be repaid
in small installments. SHGs have also helped in the empowerment of
women. However, the borrowings are mainly for consumption purpose.
Problems in Rural Credit System
Insufficiency: In spite of expansion of rural credit structure, the volume
1.
of rural credit in the country is still insufficient in comparision to its
demand.
Inadequate amount of sanction: The amount of loan sanctioned to the
2.
farmers by the agencies is also very much inadequate for meeting their
different aspects of agricultural operations.
Lack of institutional sources: Due to heavy demand for credit
3.
institutional credit sources are not sufficient to fulfill the demand.
Lesser Attention of poor farmers: Rural credit agencies and its schemes
4.
have failed to meet the needs fo the small and marginal farmers. On the
other hand well to do farmers are getting more attention from the credit
agencies for their better credit worthiness.
Growing overdues: The problem of over-dues in agricultural credit
5.
continues to be an area of concern. The recovery of agricultural advances
to various institutions is also not at all satisfactory. There are few
allegations that farmers are deliberately rufising to pay back loans as a
result of that, the credit agencies are becoming wary of granting loan to
farmers.
Agricultural Market System
The agricultural market system refers to the system through which agricultural
products reach our tables.
4 MACRO ECONOMICS
It is a process that involves assembling, storage, processing, transportation,

packaging, grading and distribution of different agricultural commodities across
the country.
Problems faced by farmers

Manipulations by Big Traders: Prior to independence, farmers suffered
a.
from faulty weighing and manipulation of accounts while selling their
produce to traders.
Lack of market information: Due to lack of market information farmers
b.
were bound to sell their produce at low price.
Lack of storage facilities: Farmers were bound to sell their produce
c.
at low price because there were no proper storage facilities to keep back
their produce for selling later at a better price.
Measure to Improve Agricultural Marketing
Measures initiated by the government to improve agricultural marketing are as
follows:
1. Regulated markets: Regulation of market is required to create orderly
and transparent marketing conditions. In regulated markets, sale and
purchase of the produce is checked by the market committee consisting
the representatives of government, farmers and the traders. This policy
benefited farmers as well as consumers.
2. Infrastructural facilities: Improvement in physical infrastructure is to
improve the agricultural marketing. As the current existing facilities such
as roads, railways, warehouses, processing units are not sufficient to
meet the growing demand. Hence, government ensures the improvement
in physical infrastructure.
3. Co-operative marketing: Co-operative marketing is the measure
taken by the government in realising the fair prices for farmer products.
Farmers, as members of these societies bargain well for better prices for
their produce through collective sale.
Milk cooperatives in Gujarat have been very successful in transforming
the social and economic conditions of Gujarat and some other parts of
the country.
4. Different Policy Instruments: In order to protect the farmers, the
government has initiated the following policies:
• Minimum support prices (MSP): To protect the interest of farmers,
government fixed the minimum support prices of agricultural products,
like wheat, rice, maize, cotton, sugarcane, pulses, etc. Such a price may
be regarded as an offer price, at which the Government is willing to buy
any amount of grains from the farmers.
• Maintenance of Buffer Stocks: The food corporation of India (FCI)
purchases wheat and rice at the minimum support price to maintain
Buffer stock. Buffer stock is created in the years of surplus production
and is used during shortages and areas of natural calamities.
It helps to ensures regularity in supply and stability in prices.
RURAL DEVELOPMENT 5
• Public distribution system (PDS): The public distribution system in

our country operates through a network of ration shops and fair price
shops. Fair shops offer essential commodities like wheat, rice, kerosene,
etc. at a price below the market price, to the weaker sections of the
society.
Emerging Alternate Marketing Channels
An alternate way for agriculture marketing that has emerged are channels where
farmers can directly sell their produce to consumers.
These channels are Apni Mandi (Punjab, Haryana and Rajasthan), Hadaspar
Mandi (Pune), Rythu Bazars (Vegetables and fruits market in Andhra Pradesh)
and Uzhavar Sandies (Tamilnadu). A number of national and multinational
chains are joining with farmers by helping them to produce better quality farm
products by providing seeds and other inputs at certain price.
In this way farmer will have larger markets for their produce and will also reduce
price risk.
DIVERSIFICATION OF AGRICULTURAL ACTIVITIES

Agriculture diversification refers to either a change in cropping pattern or the
farmers opting for other non-farming options like poultry farming, animal
husbandry, etc. This practice allows farmers to expand the production, which
helps generate a higher level of income. Changing a cropping pattern implies
the diversification between food and non-food crops, conventional crops and
horticulture, high value and low value crops, etc.
Benefits of Diversification
1. It helps in reducing risk factors as it ensures that the farmers do not lose
all of their resources if the weather does not favour the crop production.
2. Since multiple crops can be harvested from a small field, the production
increases ten-fold, which ensures an increase in income of farmers.
3. The agriculture sector is already crowded in India; therefore it makes
provision for additional employment in rural areas.
4. The importance of crop diversification lies in the fact that it effectively
increases soil fertility and controls pest incidences.
Non-Farm Areas of Employment
Animal Husbandry/live stock farming: It includes breeding, rearing
1.
and caring for farm animals. It provides livelihood to over 70 million rural
farmers. India owns one of the largest livestock populations in the world.
Livestock is also used by farmers as an instrument in a farm for transport
and carrying agricultural inputs, and animal like cows are used in the
field for conventional ploughing method.
Poultry has the largest share of total livestock in India. Livestock production
provides increased stability in income, food security, transport, fuel
and nutrition for the family, without disrupting other food producing
activities.
6 MACRO ECONOMICS
2. Dairying: It is the branch of agriculture which involves breeding, raising

and utilisation of dairy animals for the production of milk and the various
dairy products processed from it.
(Operation flood) white revolution: It was started by national
dairy development board (NDDB) in 1970 under the expert guidance of
Dr. Verghese Kurien. All farmers pool their milk produce according to
different grades and same is processed and marketed to urban centres
through cooperatives. The farmers are assured of a fair price and income.
After successful implementation of operation flood by Gujarat India ranks
first in the world in milk production.
3. Fisheries: With the increase in population, burden on land has increased,
fisheries have became an important non farm area of employment. It is
an important source of livelihood for people living in backward coastal
areas.
Kerala, Maharashtra, Gujarat and Tamilnadu are the principal states
in India where fisheries is an important source of livelihood in the rural
areas.
The fishing community in India depends almost equally inland and
Marine sources of fishing. All the sources are called “Waterbodies”. The
fishing community calls the “Water bodies” as the “Mother” or “provider”.
In India after progressive increase in budgetary allocation and introduction
of new technology in fisheries and agriculture, the development of fisheries
has come a long way. Despite a significant segment of rural population
engaged in fisheries, this sector contributes merely 2% to GDP. A large
share of fish-worker families are poor. Widespread underemployments
low per capita earnings, high illiteracy rate and indebtedness are the
major problems faced by the fishing community.
4. Horticulture: It refers to the art or science of cultivating fruits,
vegetables, tuber crops, flowers, medicinal and aromatic plants, spices
and plantation crops.
Over times there has been a substantial increase in area under these
crops. These crops play a vital role in providing food and nutrition,
besides providing opportunities for employment. Economic condition of
many farmers engaged in horticulture has improved. Presently, India
is a second largest producer of fruits and vegetables in the world. We
are emerging as leading producer of mangoes, bananas, coconuts,
cashewnuts, etc. for enhancing the role of horticulture, more investments
should be made in infrastructure like electricity, cold storage systems,
marketing linkages, etc.
Horticulture provide great scope for women employment.
(Golden Revolution: The period betwen 1991 to 2003 is known as
the period of Golden Revolution in India. The golden revolution in India
is related to the production of honey and horticulture. It is a part of the
important agricultural revolutions of India.)
RURAL DEVELOPMENT 7
(Yellow Revolution: It was launched in 1986-1987 to increase the

production of edible oil, especially mustard and seasame seeds to achieve
self-reliance.)
Information Technology: It refers to that branch of engineering that
5.
deals with the use of computers and telecommunications to retrieve and
store and transmit information.
Through appropriate information and software tools, government has
been able to predict areas of food insecurity and vulnerability to prevent
or reduce the likelihood of an emergency.
Organic Farming
It is the form of agriculture that relies on techniques such a crop rotation, green
manure, compost and biologial pest control.
his method avoids the use of synthetic chemical fertilizers. Organic farming
T
produce safe and healthy food, without leaving any adverse impact on environment.
Organic farming take care the health of soil.
Benefits of Organic Farming

1. Organic farming method uses the natural environment to enhance the
productivity of an agriculture.
2. The produce of organic farming is pesticide free and is produced in an
environmentally sustainable way.
3. Crop diversity can be seen in organic farming. In conventional farming
mass production of one crop in one location is focused while in organic
farming it is possible to grow multiple crops in the same place.
4. It impvoes soil fertility and feeds nutrients to the soil to feed the plant.
5. Organic farming improves the health of people, soil and eco-system.
6. Using fertilizers and pesticides ground water is polluted but organic
farming replaces it with organic fertilizers hence it helps to prevent water
pollution.
Major Problems and Constraints for organic farming in India
Lack of Awareness: The most important constraint felt in the progress
1.
of organic farming is the inability of the government policy making level
to take a firm decision to promote organic agriculture.
Lack of infrastructure and marketing facilities: Organic farming faces
2.
problems of inadequate infrastructure and marketing facilities.
High input costs: The small and marginal farmers in India have been
3.
practicing a sort of organic farming in the form of the traditional farming
system. They we local or own farm renewable resources and carry on the
agrilcutural practicies in an ecologically friendly environment.
However, now the costs of the organic inputs are higher than those of
industrially produced chemical fertilizers and pesticides including other
inputs used in the conventional farming system.
8 MACRO ECONOMICS
Low output: It has a lesser output in initial years as compared to Modern

4.
agriculture farming. As a result small marginal farmers find difficult to
adapt organic farming.
Sorter food life: According to research, the shelf life of organic foods are
5.
shorter. Because, organic fruits and vegetables are not treated waxes or
preservatives to the same degree that conventional fruits and vegetables
are, they may indeed spoil faster.

Employment : Growth, Informalisation
and Other Issues
7

Employment is the number or percentage of people who have jobs.
Employment is defined as what you do as a paying job. Example: Some
people working for a coffee shop, some work on farms, in factories, some
people work at shops, some people run their own business and few people
also work at home. Employment enable people to do work for earning. Every
working persons contributes to national income and gross domestic product
by engaging in various economic activities.
UNEMPLOYMENT
It is a situation when people are willing to work and able to work at
existing wage rate, but are not getting work. Here economy fails to create
more jobs. It is a situation of not being able to find a job. Here demand
for labour force is less.
(Labour force is the total number of people who are eligible to work including
employed and unemployed people.
Labour force = Persons working + Persons seeking and/or available for
work)
Labour Force Participation Rate (LFPR)
It is defined as the section of working population in the age group of 16-
64 in the economy currently employed or seeking employment. People
who was still undergoing studies, housewives and persons above the age
of 64 are not counted in this labour force.
The labour force participation rate should at 49.8% in 2017-18, falling
sharply from 55.9% in 2011-19
Labour force
LFPR = ×100
Total working age population
Labour Supply
It is the total hours that workers wish to work at a given real wage rate.
Work Force
The number of persons who are actually employed at a particular time
are known as work force. It includes only those persons who are engaged
in productive activities
Unemployed people – labour force = work force
Work force = Labour force – Number of persons not working but willing to work

(5)
EMPLOYMENT : GROWTH, INFORMALISATION AND OTHER ISSUES 45
Participation of People in Employment

A worker is an individual who is involved in some economic activity, to
earn a living.
Worker includes both a self-employed persons and a salaried employee.
→ During 2011-12, the total number workers in India was 473 million
persons. Since majority of our people reside in rural areas, the proportion
of workforce residing there is higher. So, out of 473 million workers,
nearly three-fourth were rural workers.
→ Around 70% of total workers are male workers and the rest are female
workers.
→ Rural women participate in larger number in productive activities as
compared to urban women. Among the rural workers, the share of female
workers is more than one-third, whereas share is around one-fifth in
case of urban workers.
→ In rural areas, many women carry out works like cooking, fetching water
and fuel wood and participate in farm labour. They are either not paid
wages in cash or are paid in the form of grains. For this reason, these
women are not categorised as worker. However, it is often argued that
these women should also be called workers.
Worker-Population Ratio (WPR)
Worker population ratio is defined as the number of persons employed
per 1000 persons. In 2015-16 worker population ratio was estimated to
be 47.8 percent at the all India level. WPR is an indicator which is used
for analysing the employment situation in the country.
The ratio is useful in knowing the proportion of population that is actively
contributing to the production of goods and services of a country. If the
ratio is higher, it means that the engagement of people is greater.

Table shows worker population ratio in India (2011-12)
Sex Worker-population Ratio
Rural Urban Total
Men 54.3 54.6 54.4
Women 24.8 14.7 21.9
Total 39.9 35.5 38.6
These are the following conclusion are drawn.
• Higher proportion of rural people: In urban areas, the proportion is 35.5%,
wheras in rural area, the ratio is about 39.9%.
• Employment Opportunities: Rural people have limited resources and
participate more in the employment market. On the other hand, urban
people have a variety of employment opportunities. They look for the
appropriate job to suit their qualifiacation and skills.
• Education level: In rural areas, many do not go to schools or colleges and

even if some go, they discontinue in the middle to join the workforce. In
urban areas, a considerable section is able to study in various educational
institutions.
• Hihger Proportion of Male Workers: As compared to females (21.9%),
more males (54.4%) are found to be working. Men are able to earn high
incomes and, therefore, families discourage female members taking up
jobs.
• More Women Workers in Rural Areas: Ratio of women workers in rural
areas (24.8%) is more than the women workers in urban areas (14.7%). It
happens because people in rural areas cannot stay at home due to their
poor economic condition.
• Underestimation of Women Workers: The number of women workers
in our country are generally underestimated because many activities
undertaken by them are not recognised as productive work. For example,
many women are actively engaged in activities within the house and at
family farms, but are neither paid for such work, not they are counted as
a worker.
EMPLOYMENT
An activity which enables a person to earn means of living. Employment
may be either in the form of self-employment or wage employment.
Self-employment
An arrangement in which a worker uses his own resources to make a
living, is known as self-employment.
→ Workers who own and operate an enterprise to earn their livelihood are
known as self employed.
→ About 52% of workforce in India belongs to this category.
→ In case of self-employment, a person makes uses of his own land, labour,
capital and entrepreneurship, to make a living. e.g. Shopkeepers, traders,
businessmen, etc.
Wage Employent (Hired Workers)
An arrangement in which a worker sells his labour and earns wages in
return, is known as wage employment.
Under wage employment, worker is known as employee (or hired worker)
and buyer of labour is termed as employer.
→ Workers do not have any other resources (land, capital and
entrepreneurship), except their own labour.
→ They offer their labour services to others and in return get wages for their
services.
e.g. if a doctor running his own clinic is an example of self employment.
However, if the doctor is employed by a hospital, then it will be a wage
employment.
Two types of wage employment are:

(i) Regular workers (regular salaried employees)
(ii) Casual workers
Regular Workers
When a worker is engaged by someone (employer) or by an enterprise
and is paid wages on a regular basis, then such worker is knwon as
regular salaried employees.
Regular workers account for just 18% of India’s workforce e.g. Professors,
Teachers, Civil Engineer working i the construction company etc.
They also get social security benefits (like person, provident fund, etc.)
Casual Workers
Workers who are casually engaged and, in return, get renumeration
for the workdone, are termed as casual workers. They are not hired on
a permanent basis. This means that they do not have jobb security,
regular income, social benefits, casual workers contribute 30% of India
workforce.
Nature of Emplpoyment Percentage
Self employed 52
Regular workers 18
Casual workers 30
Total 100
Distribution of Employment by Gender
→ Self-employment is a major source of livelihood for both men (52%) and
women (56%).
→ Casual workers account for the second major source for both men (29%)
and women (31%).
→ In case of regular salaried employment, men are found in greater
proportion (20%), whereas women form only 13%.
The reason for this could be skill requirement as regular salaried jobs
require skills and a higher level of literacy.
The given figure shows the distribution of employment for gender (2011-
12)
+ + + +
+ + Gender (2011-12)
+ + + + +
+ + + + + ++
+ + ++ + +
+ + + + + +
+ + + + + + + ++
+ + + ++
+ + ++ + ++
+ + 31% Self employed
+ + +29%
+ ++ +
+ + ++ +
+ + + +++
Casual workers
+ + + ++ + + ++ + +
++ + +++
++ + 51% 56%
+ ++ +
Regular workers
20% 13%
Male Workers Female Workers

Distribution of Employment by Region

→ Self employment: It is the major source of livelihood in both urban areas
(43%) and rural areas (56%). But , in case of rural areas, self-employed
workers are greater majority of rural people are engaged in farming on
their own farmland.
→ Casual Workers: In case of rural areas, casual workers account for second
major source of employment with 35% of work force. Casual workers in
urban areas account for 15%.
→ Regular salaried employees: In urban areas, it is the second major source
with 42% of work force.
Urban people have a variety of employment opportunities because of
their education qualification and skills.
Only 9% of rural people are engaged as regular salaried employees due
to illiteracy and lack of skills.
9%
42%
35%
15%
43% 56%
Distribution of Employment in Different Sectors
At present, the Indian economy is passing through a tough time. But it is

expected that our economy will recover from this slow down very soon.
All the working persons engaged in these divisions.
Primary sector: This sector includes agriculture, mining, foresting and
1.
fishing also.
It contributes 48.9% of employment in the economy.
Secontary sector: This sector includes manufacturing, electricity, gas,
2.
water supply and construction.
Tertiary sector: Service sector includes trade, financial, real estate,
3.
professional services, hotel, transport and communication.
Following figure shows the distribution of employment in different

sectors:
24.3%
48.9%
26.8%
Distribution of Rural-Urban employment in Different sectors
Employment in Rural Areas

1. 64.1% of the workforce in rural areas are engaged in primary sector
(agriculture and mining and quaarrying).
2. 20.4% of rural workers are working in secondary sector (manufacturing
industries, construction and other divisions).
3. Service sector or Tertiary sector provides employment to 15.5% of rural
workers.
Employment in Urban Areas
1. In case of urban areas, primary sector has the least share with just
6.7%. So, activities like agriculture or mining are not the major source of
employment in urban areas.
2. The secondary sector gives employment in about 35% of urban workforce.
3. People are mainly engaged in the service sector with 58.3% of urban
workers.
Distribution of Employment (Male-Female) in Different Sectors

The share of male-female employment in different sectors is shown with
the help of percentage bar diagrm depicted in the following figure.
Distribution of Employment (Male-Female) in Different Sectors (2011-12)
From the given figure, the following conclusions are intepreted.

Male Employment
1. 43.6% of male population is concentrated in the primar sector.
2. 25.9% of male workers are engaged in the secondary sector.
3. Service sector provides employment to 30.5% of male workers.
Female Employment
1. Women workers concentration is also very high in the primary sector.
62.8% of the female workforce is employed in the primary sector, whereas
only 43.6% of males work in that sector. It happens because men get
opportunities in the both secondary and service sectors.
2. Only 20% of female workforce are employed in the secondary sector.
3. The service sector gives employment to 17.2% of female workers.
Jobless Growth
It refers to a situation where GDP of an economy increases due to
innovative technology without increase in level of employment. Because
companies are trying to achieve their target through efficient technology
without use of manpower.
Changing Structure of Employment
In India majority of population lives in rural areas and they are majorly
depending on agriculture. it shows the highest percentage of people
is getting employment from primary sector, but this percentage is
continuously decreasing because of urbanisation and shifting of people
from rural to urban areas.
In Urban areas secondary and tertiary sector provides employment
more than primary sector because people are engaged in manufacturing
and service providing. percentage of people getting employment from

secondary and tertiary sector has been increased.

The following table shows the trends in employment
Sector 1972-73 1999-2000 2011-12
Primary sector 74.3 60.4 48.9
Secondary sector 10.9 15.8 24.3
Tertiary sector 14.8 23.8 26.8
Total 100 100 100
Casualisation and Informalisation of Workforce
Casualisation of workforce means shift of self-employed and regular
salaried employed to casual wage work. Casual workers are defined
as those who work for others in farm or non farm enterprises and are
paid wages that are daily basis or periodic basis. It is due to lack of
opportunities in the organised sector people start working as casual
workers.
In the last four decades (1972-2012). People have moved from self
employed and regular salaried employment to casual wage work.
Informalisation of workforce refers to a situation where there is a
continuous decline in the percentage of workforce in the formal sector
along with simultaneous rise in informal sector’s workforce.
Employment may broadly classified as:
(i) Formal or organised sector: Formal sector refers to organised sector of the
economy. it includes all government departments, public enterprises and
private establishments which hire 10 or more, workers. Those working in
organised sector are called ‘formal workers’. Government protect them in
various ways through its labour laws and they can form ‘Trade Unions’
to protect their interests. However organised sector provides work to just
7% of the total workforce.
(ii) Informal or unorganised sector: It includes all such private enterprises
which hire less than 10 workers, besides farming and self employment
ventures those working in unorganised sector are called ‘informal workers’.
Informal sector workers do not get regular income they do not have any
protection from the government. Such workers have the risk of being
dismissed without any compensation. In India, over 90% employment is
found in the unorganised sector, like small farms, household industries,
shops and other self-employment units.
UNEMPLOYMENT TYPES IN INDIA
Unemployment can be classified in rural unemployment and urban
unemployment.
Around 70% of India’s population lives in villages. Agriculture is the

single largest source of their livelihood. But agriculture suffers from a
number of problems like dependence upon rainfall, financial constraints,
old technology, etc.
Rural unemployment can be classified as:
1. Open unemployment: In the agriculture sector, there are large numbers
of landless workers who are openly looking for work. Here the person are
able and willing to work at the prevailing wage rate, but fail to get work.
They can be seen and counted in terms of the number of unemployed
people.
2. Seasonal employment: In India, we have mostly unirrigated land which is
capable of giving only one crop a year. Our farmers remain unemployed
from 3 to 8 months a year. They have not tried to find any alternative
occupation for themselves in this period like road building, brick making,
house construction, digging wells, etc. out of laziness our farmers fail to
utilise their time. So they are employed for certain seasons only.
3. Disguised unemployment: In India there is too much pressure of
population on land. As a result productivity per person falls. Disguised
unemployment occurs when the number of workers engaged in a job is
much more than actually required to accomplish.
Urban Unemployment
The unemployed in the urban areas have increased considerably over the
year.
The number of unemployed registered in employment exchanges has
increased more than eight times. In 1961, there were 32 lakh registered
unemployed, in 2008 their number rose to 270 lakh.
Various forms of urban unemployment are:
1. Industrial unemployment: Those illiterate persons who are willing and
able to work in factories or industries in urban areas but cannot find
work. Rapid rise in population and rural urban migration increases so
industrial unemployment also increased.
2. Educated unemployment: The most horrifying kind of unemployment
is when the educated youth are unable to find appropriate jobs to suit
their qualifications. With an improvement in education over time, skilled
workers have increased in number but the number of available jobs has
not increased correspondingly. This cause educated unemployment.
3. Technological unemploymet: This type of unemployment take place
every time technology upgrades and the existing workforce are unable to
cope with new technology. if the skills required to meet the new technology
do not match the existing skill-sets of the employed workers and they
can’t adopt, they become unemployed. Upgradation is a natural process,
with cyclical obsolescence as one set of technology becomes irrelvant and
gets replaced by another.
Causes of Unemployment
To be able to deal with the problem of unemployment, it is now necessary
for you to understand its causes.
1. Slow economic growth: A slow rate of economic growth would mean
that the national output is not increasing by much. It indicates that not
enough jobs are being created to absorb the workers able and willing to
work. Simply, labour supply is more than existing job opportunities.
2. Population explosion: The number of people looking for jobs had increased
over the years as population increases. The rising population proves to
be a burden on the number of jobs that can actually be created in an
economy with its limited resources.
3. Over-dependence on technology: Now a days multinational companies are
trying to achieve their targes by using more machineries instead of man
power. Innovative technologies replace the demand for labours.
4. Underdeveloped Agriculture: Lack of irrigation facilities, lack of credit
facilities and indebtness of farmers leads to slow growth in agriculture.
5. Defective educational system: The prevailing education system in India
is full of defects as it fails to make any provision for providing technical
and vocational education. As a result, educated people are unable to
meet the requirements of the firm.
6. Joint Family system: In joint families there is a high tendency to survive
on a joint income without work. It encourage high degree of disguised
unemployment.
7. less savings and investment: Due to shortage of savings and investment
opportunities of employment have not been created. Due to lack of capital
number of firms, organisations and industries are inadequate.
Remedial Measures for Unemployment
Following are the suggestions to solve unemployment problems:
Increase in production: To increase employment, it is essential to increase
1.
production in agriculture and industrial sectors. Development of small
and cottage industries should be encouraged.
More importance to employment programmes: In five year plan more
2.
importance should be given to employment. The programmes like
irrigation, roads, flood control, power, agriculture, rural electrification
can provide better employment to people.
Change in education system: Educational pattern should be completely
3.
changed. More emphasis is given on practical training and vocational
education.
Expansion of employment exchanges: More employment exchanges should
4.
be opened. Information regarding employment opportunities should be
given to people.
More assistance to self employed people: Most people in India are self
5.
employed. They are engaged in agriculture, trade, cottage and small scale
industries etc. These persons should be helped financially, providing

raw, material and technical training.
Improvements in infrastructure: The infrastructural facilities like health,
6.
education, irrigation, electricity, roads, etc. are critical for overall
development of the economy. Better infrastructural facilities enable
agriculture and industry sector to produce to their full capacity. This will
generate more employment.
Promotion to investment: Rate of capital formation in the country should
7.
be accelerated. Capital formation should be particularly encouraged
in such activities which generate greater employment opportunities.
Government should approach foreign countries to invest in India due to
larger investment economy can increase job opportunities.
(Government of India has already started campaigns like skill India, make
in India and start up India, for the development of Indian Economy.)
Sources of Unemployment Data
Currently, unemployment data is collected by several departments,
agencies and ministries in India.
The primary agencies for survey and collectiion are:
1. Employment-unemployment survey (NSSO): It is the most
comprehensive survey providing labour force statistics in India.
It was first conducted in 1955 and since 1972-73, is conducted every five
years.
2. Population Census: It collect data on main, marginal and non workers.
However, since census data comes every 10 years, these figures hardly
get any attention.
3. Directorate General of Employment and Training (DGET): It is the apex
organisation for development and co-ordination at national level for the
programmes relating to vocational training including women’s vocational
training and employment services. It has implementing the employment
market information (EMI) scheme over the last 30 years. EMI provides
information about the structure of employment, occupational structure
and educational profile of employees.
Government Policies for Employment Generation
Government has taken many initiatives to generate employment, ensuring
at least minimal safety and job satisfaction. Since independence, the
union and state governments have played an important role in generating
employment or creating opportunities for employment generation.
* Government provides ‘Direct Employment’ by employing people in various
departments for administrative purposes. It also runs industries, hotels
and transport companies and hence provides employment directly to
workers.
* With increase in output of goods and services of government enterprises,
private enterprises providing raw material to government enterprises
Infrastructure
8
Infrastructure is the term for the basic physical systems of a nation or
business.
Transportation, Communication, Sewage, Water, health, Electric system,
etc. are the examples of infrastrucutre. These systems tend to be high cost
investments and are vital to a country’s economic and social development.
Infrastrucutre can be categorized into two heads:
(i) Economic Infrastructure: It is defined as infrastructre that promotes
economic activity, such as roads, highways, railroads, airports, sea ports,
electricity, water supply etc.
It helps in production of goods and services and its distribution. In the
absence of economic infrastructure, it is virtually not possible to develop an
efficiency system of growth and development.
(ii) Social infrastructure: Social infrastructure refers to the core elements
of social change (like school, universities, hospitals, and nursing homes)
which serve as a support system for the process of social development of
a country. Social development focuses on human resource development.
It implies that the development of skill personnel as well as healthy and
efficient human beings.
(Economic infrastructure are commercial in nature. It provide basic facilities
to make the business in the country easier and more profitable. The same
also makes the economy richer. While social infra, like healthcare for poor,
sanitation, education, skill development, parks, etc. is more on providing basic
well being facilities for the needy. Here private sector is showing less interest
since it is not much profitable. It is more like social service so state and central
government provides social infrastructure.
Economic infrastructure enhance economic growth (implying an increase in
living standards of the people), social infrastructure focus on human growth
(implying an increase in their quality of life).
While economic infrastructure accelerates the process of growth, social
infrastructure accelerates the process of human development. Hence both are
supplementary and complementary to each other.)
Importance of Infrastructure
The infrastructure is important for faster economic growth and alleviation
of poverty in the country. The adequate infrastructure in the form of road
and railways transport system, ports, power, airports and their eficient
working is also needed for integration of the Indian economy with other
economies of the world.
Following are the importance of Infrastructure:
(i) The smooth functioning of the economy: Infrastructural facilities are
very necessary and vital for the smooth functioning of the economy. They
(5)
are like wheels of development without which the economy will not be
able to function properly.
(ii) Development of agriculture: The development of modern agricutlrure
depends on infrastructural facilities (roadways, railways and shipping)
for speedy and large-scale transport of seeds, pesticides, fertilizers, etc.
Development of agriculture also depends on the development of irrigation,
credit, transport, power, marketing, training, improvement of research
and development and other such facilities.
(iii) Development of industry: Industrial production requires not only
machinery and equipments but also requires. Energy, skilled manpower,
management, banking, insurance and transportation services. These
activities and facilities will directly lead to the development of the
industrial sector of the economy.
(iv) Improvement in productivity: Infrastructural development such
as transportation facilities and education increase the productivity.
Development of science and technology is also important in improving
the economic productivity. Morever, research and development also play
a critical role in economic development.
(v) Employment generation: Infrastructure helps in generating
employment. Many people get employment in infrastructural project like
construction and maintenance of road, railways, electricity plants, etc.
Many more people are able to find employment in industry and trade,
after the development of strong infrastructure.
(vi) Infrastructure enhances size of the market: Large scale production is
possible only when size of the market is large. Infrastructure enhances
size of the market. Proper transportation facilities and other economic
infrastructure leads of expansion of market.
(vii) Infrastructure facilitates outsourcing: A country with advance
infrastructure facilities is able to get benefits from the outsourcing work.
India is emerging as a global destination for BPO, KPO’s, call centres, etc.
due to IT support system and sound infrastructure.
(viii) Infrastructure induces foreign direct investments (FDI): Due to sound
infrastructure flow of investments from abroad increases.
STATE OF INFRASTRUCTURE IN INDIA
Traditionally, building and mainaining infrastructure in India has been
one of the responsibilities of government. But with time, the government
has started permitting private sectors into the field of infrastructure.
Currently, many of the infrastructure projects in the country are handled
either soley by private sector enterprises or under a joint venture of the
public and private sector. Infrastructure in India has still a very long way
to go before we can call ourselves a developed nation. The rural sector in
India is still underdeveloped. The roads and other means of transportation
are still not very developed we require well roads connecting the remote
areas of the country with the urban states so that more and more facilities
INFRASTRUCTURE 7
are made available to the rural Indian population. A lot of artists and
farmers still work in the remote places of the country and are unable to
sell their products in various places due to lack of proper infrastructure.
Majority of our people live in rural areas. Rural women are still using
bio-fuels such as crop residues, dung and fuel wood to meet their energy
requirement.
They walk long distances to find fuel, water and other basic needs. Safe
drinking water with Pucca house is still a dream for vast proportion of
population. Bullock carts still play a crucial role in rural transportation
market. Thus, development of infrastructure and economic development
go hand in hand. Agriculture depends, on the adequate expansion
and development of irrigation facilities. Industrial progress depends
on the development of power and electricity generation, transport
and communications. Obviously, if proper attention is not paid to the
development of infrastructure, it is likely to act as a severe constraint on
economic development.
ENERGY
Energy is the most important component of economic infrastructure. It is
an important input for most of the production processes and consumption
activities.
(Considering the vast potential of energy saving and benefits of energy
efficiency, the Government of India enacted the energy conservation act,
2001. The act provides the legal framework, institutional arrangement and
a regulatory mechanism at the central and state level, to conserve energy
in the country.)
Important Sources of energy are:
(i) Commercial and Non-commercial energy
(ii) Conventional and non-conventional sources of energy
(iii) Primary and Secondary sources
Commercial Energy
Commercial energy is energy which is available to the users at some
price.
Coal, petroleum products, natural gas and electricity are the important
components of commercial energy. These goods are largely used for
commercial purposes in the factories and farms.
Non-commercial Energy
Non commercial energy is energy which is available free of cost to the
users. Firewood, agricultural waste and cow dung are the important
components of non-commercial energy it is generally used in the rural

area for domestic purposes, mainly cooking.
Difference between Commercial and Non commercial energy
S. Basis Commercial Energy Non-commercial
no. Energy
1, Meaning It is available to the It is available to the
users at some price. user’s at free of cost.
2. Used by It is used for It is used for domestic
commercial purposes and consumption
in factories and farms. purposes.
3. Form of These are non- These are renewable
energy renewable form form of energy
of energy (except
hydropower)
4. Components Coal, petroleum Firewood, agricultural
products, natural gas waste, cowdung, etc.
and electricity
Conventional Source of Energy
Conventional source of energy are the natural energy resources which
are present in a limited quantity and are being used for a long time. e.g.
coal, petroleum, natural gas and electricity.
Non-conventional Source of Energy
Non-conventional source of energy are those sources which have been
discovered or explored only in the recent years.
e.g. Solar energy, wind energy, biomass, tidal power and geo-thermal
energy.
Difference between Conventional and Non-conventional sources
Basis Conventional Sources Non-conventional

Sources
1. Availability Conventional source of Non-conventional
energy are limited soruces are unlimited
2. Uses These have been used These has come into use
since the early times. only recently.
3. Pollution These source cause These source do not
environment pollution cause environmental
pollution
4. Cost Low initial setup but High initial setup but
very expensive per unit. cheaper per unit.
INFRASTRUCTURE 9
5. Examples Coal, natural gas, Solar power, wind

fire wood, electricity, power, tidal power, bio
hydroelectricity and mass energy and ocean
thermal electricity, cow wave energy.
dung
Primary Sources
Primary or direct sources of energy can be used directly. These are the
gifts of nature and they do not need any transformation for using them
e.g. coal, oil, natural gas and woods, nuclear fuels (uranium), the sun, the
wind tides, mountain lakes, the rivers (from which hydroelectric energy
can be obtained) and the earth heat that supplies geothermal energy.
Secondary Sources
Secondary or indirect sources of energy results from transformation of
primary sources. e.g. Electricity is a secondary form of energy produced
from primary energy resources including coal, hydrocarbons, hydro
energy, nuclear energy, etc.
*CONSUMPTION PATTERN OF ENERGY IN INDIA
Consumption pattern of energy shows the percentage use of different
sources (commercial and non commercial) of energy.
Commercial energy consumption makes up about 74% of the total energy
consumed in India. This includes coal with the largest share of 54%,
followed by oil at 32%, natural gas at 10% and hydro energy at 2%.
Non-commercial energy sources consisting of firewood, cow dung and
agricultural wastes, account for over 26% of the total energy consumption.
India depends on imports for crude and petroleum products, which is
likely to grow rapidly in the near future.
Trends in sectoral share of commercial energy consumption (in%)
Sector 1953-54 1970-71 1990-91 2014-15
Household 10 12 12 23
Agriculture 01 03 08 18
Industries 40 50 45 44
Transport 44 28 22 2
Other’s 5 07 13 13
Total 100 100 100 100
Power/Electricity
The msot viable form of energy, which is often identified with progress
in Modern civilization, is power, commonly called electricity. Power is an
essential condition for the development of a country. With the gradual
development of various sectors of the economy, the demand for power is

increasing year after year.
The growth rate of demand for power is generally higher than the GDP
growth rate. In order to have 8% GDP growth per annum, power supply
needs to grow around 12% annually.
Sources of power generation in India are:
1. Thermal Power: A thermal power station is a power station in which
heat energy is converted to electric power. In most places the turbine
in steam driven. Water is heated, turns into steam and spins a steam
turbine which drives an electrical generator.
It is major source of electricity and account for 67% in 2016 of total
power generation.
2. Hydro-electric power: Hydroelectricity is a form of energy which is
generated from the water of fast flowing rivers or high dams or sea waves.
It contributes 13.6% of total power generation.
3. Nuclear or Atomic Power: When power is generated from the radioactive
elements like uranium, thorium and plutonium, it is termed as nuclear
or atomic power. It is the next most up-to-date source of power, whose
generation has started mostly from 1970-71. It contributes 2.10% of total
power generation.
Table shows trend in total installed capacity of power in India (2016)
Source Percent
Thermal power 67.00
Hydro-electric power 13.60
Nuclear power 02.10
New and Renewable energy 17.30
Total 100.00
(The city of thane in one of Maharashtra’s major industrial town and the
district headquarters. Here all buildings in the city must installed solar
water heating system. Solar energy is used to heat water, power traffic
lights and advertising hoardings. This results to cost and energy savings.)
Challenges in the Power Sector
Despite the encouraging growth in energy sector over the last few years,
the Indian power sector has still not been able to produce required
amount of energy.
Five Key Challenges facing by the Energy Sector
1. Inadequate Elecricity Generation: The total installed power generation
of electricity in India was 2,33,929 MW in 2013. However, India is still
unable to meet the increasing demand for electricity. This excess demand
raised many problems such as excessive load, low voltage, fluctuations
in the distribution of electricity and frequent power supply disturbance.
INFRASTRUCTURE 11
2. Underutilisation of Production Capacity: The utilisation of power

capacity is measured by plant load factor (PLF), i.e. dividing electricity
generated by production capacity. In 2001-02, the PLF was only 60%
and the remaining 40% was wasted in the process. The PLF increased to
78.6% in 2007-08 and it further reduced to 65.09% in 2014. So, there is
underutilisation of production capacity in thermal power plants.
3. Loss by state electricity boards: State electricity boards incurred heavy
losses. This is because of the loss of electricity during transmission and
distribution, theft of electricity and supply of electricity at low prices to
farmers and small industries.
4. Shortage of inputs: Thermal power plants, which are the foundation
of India’s power sector, are facing shortage of raw material and coal
supplies.
5. Lack of Public Cooperation: There is general public unrest due to high
power tariff and prolonged power cuts in different parts of the country.
Power Distribution : The Case of Delhi

Since independence, power management in the capital has changed
hands four times.
The Delhi state electricity board (DSEB) was set up in 1951. This was
succeeded by the Delhi electric supply undertaking (DESU) in 1958 and
the Delhi Vidyut Board (DVB) in 1997. After the privatisation of DVB, it
rests with two leading private players.
(i) Reliance Energy Limited (BSES Rajdhani Power Limited and BSES
Yamuna Power Limited) which manages power distribution of two-third
Delhi.
(ii) Tata Power (TPDDL), which distribute power to remaining one third.
The Tariff structure and other regulatory issues are monitored by the
Delhi electricity regulatory commission (DERC). Though it was expected
that there will be greater improvement in power distribution and the
consumers will benefit in a major way but the results are unsatisfactory.
Saving Energy : Promoting the Case of Compact Fluorescent Lamps (CFL)

and Light Emitting Diode (LED)
According to the Bureau of Energy efficiency, CFL consume about 75%
less power as compared to ordinary bulbs.
According to Indo-Asian (CFL Manufacturer), replacement of one million
100 watt bulbs with 20 watt CFLs can save 80 megawatt in power
generation. This amounts to saving of `400 crores.
Now a days, LED lamps are being promoted throughout the country
to save energy. LED bulbs uses one-tenth energy as an incandescent
bulb and half as much as a CFL to produce the same amount of light.
According to the energy efficiency services Ltd, the UJALA scheme that
aims to replace incandescent bulbs with LEDs could save 5,905 MW
in power generation and it will save `4000 for an average family due to
efficiency gains and lower replacement costs.
MEASURES TO MEET POWER CRISIS
1. Increase in production capacity: Increase the production capacity of
power plant so that it can produce sufficient amount of electricity to
fullfill the demand of electricity.
2. Improvement in plant load factor (PLF): The plant load factor is an
important indicator of operational efficiency of thermal power plants.
Improvement in plant load factor will help better utilisation of capacity of
plant.
3. Improve the Supply of Inputs to Power Plants: Thermal power plants
in India need regular supplies of coal to produce elecricity. government
should focus on option utilisation of coal and other alternative which
reduce the pollution. Burning of coal to produce electricity leads to air
pollution.
4. Impose Tariff: Tax rates have to restructured upwards to discourage
unnecessary consumptiion of power and reduce the losses of state
electricity boards.
5. Control of Transmission and Distribution Losses: To solve the problem
of electricity transmission and distribution losses is to be minimised. So
that actual availability of electricity improves.
(Transmission and distribution losses includes losses in transmission
between sources of supply and points of distribution and in the distribution
to consumers, including pilferage).
6. Promote the role of private sector: Private sector is playing a significant
role in power generation. Government must encourage their participation.
HEALTH
Health can be defined as physical, mental, and social well being, and
as a resource for living a full life. In 1948, the world health organization
(WHO) defined health with a phrase that is still used today. “Health is a
state of complete physical, mental and social well being and not merely
the absence of disease or infirmity”.
Important Points of Health
(i) It refers not only to the absence of disease, but the ability to recover and
bounce back from illness and other problems.
(ii) Factors for goodhealth include genetics, the environment, relationships,
and the education.
(iii) A person’s ability to work depends largely on his health. Good health
increases the productivity of labour.
INFRASTRUCTURE 13
(iv) A healthful diet, exercise, screening for diseases, and coping strategies
can all enhance a person’s health.
(v) A good health increase mental abilities and also enhance the quality of
life.
It is the responsibility of the government to ensure that health facilities
are accessible to all the people health is a basic facility or need of every
human which leads to overall growth and development of a nation.
State of Health Infrastructure
The government has the constitutional obligation to guide and regulate
all health related issues such as medical education, adulteration of food,
drugs and poisons, medical profession, mental deficiency and lunacy.
Health infrastructure includes hospitals, doctors, nureses and other
paramedical professionals, beds, equipments required in hospitals and a
well-developed pharmaceutical industry.
Only presence of health infrastructure is not sufficient to have healthy
people. It should be accessible to all the people.
The union government evolves broad policies and plans through the
central council of health and family welfare. It collects information and
provide financial and technical assistance to state government, union
territories and other bodies for implementatiion of important health
programmes in the country.
Development of Health Infrastructure after Independence
1. General Services: Basic infrastructure in the form of primary health
care services, has been provided in urban and rural areas. Primary health
care services include maternal and child health care services and family
welfare services. Specialised health care services are provided through
hospitals in urban areas. Number of hospitals, dispensaries, medical
colleges and number of doctors are increased.
2. Control of Communicable Diseases: To control communicable diseases
like malaria, tuberculosis and AIDS etc. many national programmes have
started.
3. Polio Programme: Pulse Polio Programme (Triple P) has been launched
in India to eradicate polio. People gave tremendous response to this
programme. To immunise the children from the deadly disease, the anti
polio drops are given to children below the age of 5 years.
4. Decline in Death Rate: Death rate has come down from as high as 27.4
per thousand in 1951 to 7.237 death per 1000 people in 2018.
5. Reduction infant mortality rate: Infant mortality rate (referring to
death of the infants upto 1 year of age) has significantly reduced from
146 per thousand in 1951 to 33 per thousand in 2018.
6. Rise in expectancy of life: Life expectancy has risen from 50 years in
1951 to 68.8 years in 2018.
(life expectancy of female is greater than male. It shows the significant

improvement in health care in India. It is mainly due to improvement
in sanitation, hosuing and education which led to a steady decline in
mortality. Female life expectancy was 70.7 years and male life expectancy
was 68.8 in 2018.)
Private Sector Health Infrastructure
In recent times, while the public health sector has not been so successful
in delivering the goods. The role of private sector, in providing health
services, has considerably grown.
More than 70 percent of the hospitals in India are run by the private
sector.
Nearly 60 percent dispensaries are run by the private sector.
Private sector control nearly two-fifth of beds available in the hospitals.
In recent times, private sector has been playing a dominant role in
medical education and training.
Medical technology and diagnostics, manufacture medical technology
and diagnostics, manufacture and sale of pharmaceuticals, hospital
construction and provisiion of medical services.
In 2001-02, there were more than 13 lakh medical enterprises employing
22 lakh people; more than 80 percent of them are single person owned,
and operated by one.
However, private sector in India has grown independently, without any
major regulation. Some private practitioners are not even registered
doctors, and are known as quacks. The role of government in providing
health care is still very important as poor people can depend only on
government hospitals, due to huge expenses in private hospitals.
Medical Tourism in India

Medical tourism is the term given to the phenomena of people travelling to
another country seeking medical treatment. Therefore, medical tourism
in India essentially refers to patients from other countries coming to India
for their medical treatments. India is among the top three destinations for
medical tourism in Asia along with Thailand and Singapore, it accounted
for around 60% of Asian revenue through health care in 2012.
Foreigners come to India for surgeries, liver transplants, dental and
even cosmetic care in 2016, around 2,01,000 foreigners visited India for
medical treatment. Indias medical tourism sector was estimated to be
worth $9 bilion by 2020. India need to upgrade its health infrastructure
to attract more medical tourism.
Rural Urban Divide

Health infrastructure is significantly biased in favour of the rich and in
favour of the urban areas. While 70 percent of the country’s population
INFRASTRUCTURE 15
lives in rural areas, but only 20 percent of hospitals are located in these
areas. In rural areas due to lack of dispensaries and medical infrastructure
people are not availing health care.
There are only 0.36 hospitals for every one lakh people in rural areas,
while urban areas have 3.6 hospitals for one lakh people.
Government hospitals in rural areas do’nt even offer X-ray or blood
testing facilities, which constitutes basic healthcare.
The poorest 20% of the Indians living in both urban and rural areas
spend 12% of their income on healthcare while the rich spend only 2%
even in rural government hospitals, doctors are not available and many
times proper medicines are also not available. Rural people have to spent
more amount on medicines and critical treatment from private hospitals
which make them indebted forever.
Three-Tier system of Health Infrastructure
In India, for the provision of public health, health infrastructure is
developed at three levels; primary, secondary and tertiary.
(i) Primary healthcare: Under primary healthcare, people are educated
about the prevailing health issues in the country. It includes promotion
of food supply and proper nutrition and adequate supply of water and
basic sanitation, maternal and child healthcare, immunisation against
major infectious diseases and injuries.
(ii) Secondary healthcare: Medical care that is provided by a specialist or
facility upon referral by primary care physician and that requires more
specialized knowledge, skill or equipment is called secondary healthcare.
These are located in big towns.
(iii) Tertiary healthcare: Hospitals which have advanced level equipment
and medicines and undertake all the complicated health problems, which
could not be managed by secondary hospitals, comes under ‘Tertiary
Health Care’. e.g. AIIMS in Delhi.
Indian System of Medicine (ISM)
It is a well-known fact that traditional systems of medicines always
played important role in meeting the global health care needs. They
are continuing to do so at present and shall play major role in future
also. India has the unique distinction of having six recognized system
of medicine in this category. They are AYUSH - Ayurveda, Yoga, Unani,
Siddha, Homeopathy and Naturopathy.
At present there are 3,167 ISM hospitals, 26,000 dispensaries and
as many as 7,00,000 registered practitioners in India. ISM has huge
potential and can solve a large part of our health care problems because
they are effective, safe and inexpensive.
Critical Assessment of Health Infrastructure
Health infrastructure is an important indicator of well-being of the people
in a welfare state mechanism.
The population of India has been growing at an unpredicted rate and

growing at almost 18 million per year, India will be the most populated
nation by 2030 and the health infrastructure to deal with the population
growth is inadequate. The outbreak of Chikungunya in New Delhi gave us
a clear glimpse of poor health care system and the lack of timely actions
from the government. Problem of shortage of resources, beds, expensive
medicines were recorded. In June 2011, more than 50 children died in
Bihar because of a mysterious disease which included the symptoms of
high fever. The doctors from the national institute of virology visited the
hospital full of infected children after several days but even they could
not identify the diseases.
Even in June 2019, an outbreak of acute encephalitis syndrome (AES)
occurred in Muzaffarpur due to this more than 150 childrens were died.
These are the following deficiencies of health infrastructure in India.
1. Unequal distribution of health care services: In India most of the
health care facilities have been allocated to urban areas. Poor people
living in rural areas are not getting proper medical treatment.
2. Comunicable Diseases: Communicable diseases like AIDS (Acquired
immune deficiency syndrome), HIV (Human Immuno Deficiency Virus)
and SARS (Severe Acute Respiratory Syndrome) are raising in India.
Through effective control measures government should try to make
prevention of communicable diseases.
3. Poor management: There is a substantial mismatch between the
personnel for health care and the number of health care centres due to
rush in hospitals and lack of beds people are not getting treatment at
right time. Unavailability of doctors and bad management is seen almost
in every hospitals.
4. Privatisation: Private hospitals are replacing public hospitals but the
main moto of private hospitals are earning more due to this health care
is becoming increasingly expensive and beyond the reach of the millions
of people.
5. Poor sanitation level: Sanitation facilities are extremely poor in both
rural and urban areas. About 30% of the houses in urban areas do not
have toilet facilities and the condition in rural areas is even worse. People
are not even getting clean drinking water. These leads to spread of various
diseases.
Environment and Sustainable Development
9
Environment is the sum of all social, economical, biological, physical and
chemical components which constitute the surrounding of man.
Who is both the creator and moulder of his environment.
Components of Environment
(i) Biotic components: It includes all living elements, like Flora (Tress &
Plants), Fauna (animals) and man.
(ii) Abiotic components: It includes non living elements, like Lithosphere
(solid earth), Hydrosphere (water component), Atmosphere (gaseous
envelope).
(iii) Energy: Like solar energy, geochemical, thermo electrical, hydroelectrical
and nuclear atomic energy.
Functions of the Environment
These are the functions of the environment that supports human life and
economic activity.
(i) Provide resources for production: It supplies raw material from
the natural resources of soil, water, forests, minerals and marine life.
Resources include both renewable and non renewable (Renewable
resources are those which can be used without the possibility of the
resource becoming depleted or exhausted, like trees, animals etc.
Non renewable resources are those which get exhausted with extraction
and use. They are found in the ground. These are not living things. There
are fixed amounts of these resources and they are sometimes hard to find.
These are fossil fuels we burn for energy (natural gas, coal, and oil)).
(ii) Environment sustains life: Environment includes sun, soil, water and
air which are necessities of life. Biotic components cannot survive without
these elements.
(iii) Environment Assimilates waste: Production and consumption activities
ggenerate waste. This generate lot of garbage. These are absorbed by the
environment.
(iv) Environment enhances the quality to life: Environment includes
land, forests, oceans, mountains and deserts. People enjoy the beauty of
these elements such elements help in improving the quality of life.
As we already studied that environment provide resources for production
and it also assimilates the waste this capacity of environment is known as
carrying capacity due to these carrying capacity enviroment sustains life
and it also enhance the quality of life. We must ensure that exploitatiion
of resources does not exceed the regeneration of resources and generation
of waste does not exceed the absorption capacity of environment, so that
environment is not polluted.
(5)
When this is not so, the environment fails to perform rest functions.
This is the situation today all over the world. The rising population of
the developing countries, excessive use of natural resources, huge stress
on the earth, excessive waste generation and pollution. These results
environmental crises.
Two basic problems related to environment:
(i) Problem of pollution, and
(ii) Problem of excessive exploitation fo natural resources.
I. Pollution
Pollution refers to these acivities of production and consumption which
challenge purity of air and water.
Pollution can be in form of air pollution, water pollution and noise
pollution.
Air pollution
Air pollution is a mixture of solid particles and gases in the air.
Causes of air pollution are:
(i) Emission of gases by the motor vehicles due to increase in number of
motor vehicles air pollution rises in urban area.
(ii) Smoke emitted by the industries, particularly those using coal as an
energy. Manufacturing industries can be found at every corner of the
earth they release a large amount of carbondioxide, hydrocarbons and
chemicals into the air. This reduce the quality of air.
(iii) Agricultural activities like use of insecticides, pesticides and fertilizers.
They emit harmful chemicals into the air and can also cause water
pollution.
(iv) Air pollution also caused by the process of mining. Where in minerals
below the earth are extracted using large equipment during the process
dust and chemicals are released in the air cause massive air pollution.
(v) Indoor air pollution like House cleaning products, painting supplies emit
toxic chemicals in the air and cause air pollution. Have you ever noticed
that once you paint walls of your house, it creates some sort of smell
which makes it difficult for you to breathe.
(Air pollution causes hypertension, asthma, heart disease, stroke,
pneumonia and cancer)
Some ways to control Air: Air pollution causes health problems and
also causes damages to the property and environment. It has resulted
ozone depletion, which is leading to climate change. So, there is a serious
need to take steps to control it.
Following steps can be taken:
(i) Encourage people to use more and more public modes of transportation
to reduce pollution, also try to make use of carpooling. If you and your
colleagues comes from the same locality and have same timings you can
explore this option to save energy and money.
Environment and Sustainable Development 7
(ii) Promotion of clearer foels in vehicles, like use of electric cars, CNG instead
of petrol and Diesel.
(iii) Switch off fans and lights when you are going out. A large number of
fossil fuels are burnt to produce electricity.
(iv) Use of clean energy technologies like solar energy.
(v) Use of cleaner fuels such as LPG in household to reduce indoor air
pollution.
Water pollution
It is defined as the presence in ground water of toxic chemicals found in
water. It may consist of chemical introduced into the water bodies as a
result of various human activities. It is harmful to human health and the
environment.
Causes of Water pollution:
(i) Domestic sewerage that flows into streams and rivers.
(ii) Industrial waste drivens into rivers.
(iii) Insecticides and pesticides flows into rivers and streams.
(iv) Farmers often wash vegetables in untreated sewerage water this also
leads to flow of chemical into water which was used as insecticides and
pesticides if people eat such vegetable they can suffer.
(Polluted water is the principal cause of diseases like Hepatitis, Typhoid,
Diarrhoea, Cholera, Rotavirus, etc.)
Noise pollution
Noise pollution also known as environmental noise or sound pollution
with harmful impact on the activity of human or animal life. The source
of outdoor noise worldwide is mainly caused by machines, transport,
and million of vehicles fitted with loud horns and noise generating
engines. Excessive noise causes irritation, hypertension, hearloss, sleep
disturbances.
II. Excessive Exploitation of Natural Resources
Natural resources refer to forests, minerals, soil, etc. in order to achive
economic growth man needs natural capital (Natural Resources) along
with physical capital (Machinery). As production increases both get
depreciated but provision is only made for physical capital not for natural
capital.
Exploitation of Natural Resourcses in India
These are the following environmental concerns in India.
1. Deforestation
Deforestation is the permanent removal of trees to make room for
something besides forest. This can include clearing the land for agriculture,
using the timber for fuel, construction or manufacturing. Deforestation
leads to land degradation, bio diversity loss, ecological imbalance and air
pollution.
2. Degradation of Land
Land degradation refers to a decline in the overall quality of soil, water
or vegetation condition, commonly caused by human activities. Land
degradation is a global challenge that affects everybody through food
insecurity and higher food prices.
Causes of land degradation are as follow:
(i) Soil erosion caused by strong winds or floods. It is the loss of upper layer
fo the soil which contains major nutrients such as nitrogen, phosphorous
and potassium for growth of the plants.
(iii) Overgrazing
(iii) Excessive use of fertilizers and pesticides
(iv) Extraction of excess ground water
(v) Improper crop rotation etc.
3. Bio-diversity loss
Bio diversity is the existence of a number of different kinds of animals
and plants which together make a good and healthy enviroment.
Biodiversity loss is the disappearance of species (plant or animal)
worldwide, and also the local reduction or loss of species in a certain
habitat.
Here are the following reasons for biodiversity loss:
(i) Pollution is a major threat to biodiversity, and one of the most difficult
problems to overcome.
(ii) Greenhouse effect leads to raise in temperature, which makes difficult
for species two live.
(iii) Population growth and over consumption.
Global Warning
Global warning is a gradual increase in the average temperature of the
earth’s lower atmosphere as a result of the increase in greenhouse gases.
Among the greenhouse gases, the increase of carbondioxide in the
atmosphere is the main cause of global warming. Greenhouse gases
cause the greenhouse effect. The primary greenhouse gases in earth’s
atmosphere are water vapour, carbondioxide, methane, nitrous oxide
and ozone but the major source is carbondioxide (80%) then methane.
But methane is more powerful. The major source of carbondioxide is the
power plant, buring fossil fuels for the purpose of electricity generation.
Currently, surface temperature are rising by about 0.2ºC per decade.
Since 1950, the number of cold days and nights have decreased, and the
number of warm days and night have increased.
Consequences of global warming are:

(i) increase in the average temperature of the earth.
(ii) increase in sea level and modifying the quantity and pattern of rainfall.
(iii) natural calamities such as floods, famines, heatwaves etc.
(iv) Glacier melting
(v) Loss of beauty of nature
(vi) Various new diseases have emerged.
(vii) The global warming is extending the distribution of mosquitoes due to
the increase in humidity levels and their frequent growth in warmer
atmosphere.
(viii) Effect the marine life.
Ozone Depletion
Ozone depletion refers to the phenomenon of reductions in the amount
of ozone in the stratosphere.
The problem of ozone depletion is caused by high levels of chlorine and
bromine compounds in the stratosphere. The origins of these compounds
are chlorofluorocarbons (CFC), used as cooling substances in air-
conditioners and refrigerators. As a result of depletion of the ozone layer,
more ultraviolet (UV) radiation comes to earth and causes damage to
living organisms. UV rays is responsible for skin cancer in humans. It
also lowers production of phytoplankton and thus affects other aquatic
organisms. A reduction of approximately 5 percent in the ozone layer
was detected from 1979 to 1990. Since the ozone layer prevents most
harmful UV rays and protects us from various diseases. This led to the
adoption of the montreal protocol banning the use of chlorofluorocarbon
compounds, as well as other ozone depleting chemicals.
(Ozone hole refers to the depletion of the protective ozone layer in the
upper atmosphere over earth’s polar regions i.e. Antractica but after the
international treaty montreal protocol in 1987 the ozone layer is now
recovering).
Chipko Movement
The Chipko Movement or Chipko Andolan is a social movement that
practiced the methods of Satyagraha and non violent resistance. This is
mainly done through the act of hugging trees to protect them from being
cut down. The first Chipko action took place in the village of Mandal
in the Alaknanda Valley Uttrakhand in April 1973 and over the next
five years spread to many districts of the Himalayas in Uttarpradesh.
Sundarlal Bahuguna started Chipko Movement.
In Karnataka, a similar movement took a different name, “Appiko”, which
means to hug on 8 September 1983, when the felling of trees was started
to Salkani forest in Sirsi district, 160 men, women and children hugged
the trees and forced the woodcutters to leave.
Pollution Control Boards

In order to address two major environmental concerns in India, water
and air pollution, the government set up the Central Pollution Control
Board (CPCB) in 1974.
Functions of the Pollution Control Board
(i) To promote cleanliness of streams and wells in different areas of the
states by prevention of water pollution.
(ii) To improve the quality of air and control air pollution.
(iii) They organise through mass media a comprehensive programme towards
prevention, control and reduction in air and water pollution.
(iv) Collect and publish technical and statistical data relating to air and
water pollution and the measures for its effective prevention, control and
reduction.
State of Environment in India
India is the habitat of nearly 17.71% of the world popultion occupying
just 2.4% of the world’s geographical area. In India approx. 22% of the
population lives below the national poverty line.
The state of India’s environment 2019 in figures.
State of air: Air pollution is responsible for 12.5% of all deaths in India.
Its impact an children is equally worrying over 1,00,000 children below
the age of five die due to bad air quality in the country.
State of water: Both surface and ground water in the country are under
stress. 86 water bodies are critically polluted. The bulk of the polluted
water bodies are in Karnataka, Telangana and Kerala.
State of land and agriculture: India’s farm sector is under threat. While
the input costs for major crops are rising, the average farmland size is
shrinking.
State of Health: India’s rural health infrastructure is very poor. There
are great inequalities in health between states. The infant mortality in
Kerala is 6 per thousand live births but in Uttar Pradesh it is 64. The
problem of undernutrition and overweight cases are increasing.
State of Climate: There has been a 22% increase in India’s greenhouse
gas emission between 2010 and 2014. This has been emitted by energy
sector, which is responsible for 73% of total GHG emissions.
The Dichotomy of Environmental Degradation in India
Rapid Deforestation in India is a direct consequence of widespread
poverty. They cutting trees to use fuel wood and overgrazing is also leads
to environmental degradation.
Expanding production activity in the Urban areas is equally responsible
for environmental degradation. India is figuring among the top 10
industrialised countries of the world. While it signals India;s prosperity
in industrial production it also sounds alarming bells for environmental
pollution. Industrial smoke is polluting the air and industrial waste is

polluting the water. Expansion of vehicular traffic (in the wake of expanding
urbanisation) is generating noise pollution, beside contributing to air
pollution and global warming.
Sustainable Development
Sustainable development is development that meets the needs of the
present without compromising the ability of future generations to
meet their own needs. Increase in population, expanding cities, use of
technology, disappearing forests and shrinking natural habitats, the last
few decade have seen the emerging of debate over development that is
also sustainable.
On the one hand there are those who argue that urbanisation, concrete
buildings, and expanding roadways is the parameter of a development
but on the other is the group that argue that this expansion leads to
destroy the world.
Sustainable development is the balance in at between these two thought
process. Sustainable Development Goals (SDGs) are a collection of 17
global goals designed to be a blueprint to achieve a better and more
sustainable future for all. The SDGs, set by United Nations on 25th
September 2015 in New York. There were 193 countries who signed
SDGs. United Nations set 17 goals with 169 targets that all the member
countries have agreed to try to achive by the year 2030. These goals are
social, economical and environmental objectives. Few of these 17 goals
are no poverty, zero hunger, quality education, gender equality, clean
water, climate action, reduce inequalities, etc.
Sustainable Development Aims
(i) Sustainable and equitable use of resources, to meet the needs of the
present and future generations, without causing damage to enviroment.
(ii) To prevent further damage to our life-support systems.
(iii) To conserve and nurture the biodiversity and other resources for long
term food security.
Strategies for Sustainable Development
Sustainable development does not suggest to slow down the process
fo growth and development. It only suggest a optimum utilisation of
resources and in a manner such that economic growth is sustained and
our future generatioin will not suffer.
These are the following strategies for achieving sustainable
development.
(i) Use of non-conventional source of energy: Conventional source of
energy are the natural energy resources which are regularly used for
many years and are accepts as fuel to produce heat, light, food and
electricity. The energy sources include firewood, fossils fuels, cow dung
etc. These fossil fuels are coal, oil (petroleum) and natural gas. The major
disadvantage of these conventional sources is that they causes high

pollution. The buring of firewood and fossil fuels result in air pollution.
This can be avoided by using the non-conventional sources.
The energy derived from wind, tides, sun, geothermal heat and biomass
is termed as non-conventiional source of energy. All these sources are
renewable and environmental friendly. Wind power and solar rays are
totally free from pollution hence we can use these to produce a clean
form of energy without any wastage.
(ii) Use of cleaner fuels (CNG, LPG and Gobar gas): In rural areas,
household generally use woods, dung cake or other biomass as fuel this
leas to deforestation and air pollution. Gobar gas and LPG is promoted
to reduce air polution these are cleaner fuels. Govt. also promote this by
Ujjwala scheme.
In Urban areas, use of compressed natural gas (CNG) is being promoted
to be used as fuel. It is low priced and lower carbondioxide omissions.
(iii) Shift to organic farming: Excessive use of chemical fertilizers,
insecticides and pesticides has raised the corp. But at a cost of soil fertility
which means a loss of production capacity for future generations. These
chemicals also moves to rivers and canals which leads to water pollution.
People eats those vegetables and suffers from various diseases.
Farmers should switch over to organic farming which focusess as soil
health rather than plant-health. Organic farming avoids the use of
chemical fertilizers, pesticides and insecticides it rely upon crop rotation,
animal manures etc. Organic method can increase farm productivity and
repair decades of environmental damages.
Farming without pesticides is also better for nearly birds and animals as
well as people who live close to farms.
(iv) Establishment of mini-hydel plants: In mountainous regions, streams
can be found almost everywhere. Mini hydel plants use the energy of
such streams to move small turbines. The turbines generate electricity.
They generate enough power to meet local demands. Moreover, large-
scale transmission towers and cables are also not requird in such plants.
(v) Wind power: In areas where speed of wind is usually high. Wind mills
can provide electricity without any adverse impact on the environment.
Wind turbines moves with the wind and electricity is generated. No doubt
the initial cost is high. But the benefits are such that the high costs gets
easily absorbed.
(vi) Traditional knowledge and practices: Traditiionally, Indian people
have been close to their environment. Traditional knowledge is valuable
not only to those who depend on it in their daily lives, but to modern
industry and agriculture as well. Many widely used products, such
as plant based medicines, health products and cosmetics are derived
from traditional knowledge. People use handicrafts which contribute to
sustainable development.
(vii) Awareness to conserve natural resources: Sustainable natural

resources conservation is a process of rational use and skillful
management and preservation of the natural environment with all its
resources. By providing environmental education we can aware people to
conserve resources for future generation. People should conserve energy
and water use of solar pannel, avoid single use plactics etc. Govt. also
should take various steps to aware people. In few colleges environmental
studies is a compulsory subject. People should understand the benefit
of pure water and air role in their lives. Through awareness we can save
our earth.
(Greta Thunberg is a Swedish activist. She is known for her work against
climate change, a popular example of youth activism, she is just 16 year’s
old started protesting on 20 Aug 2018, outside the Swedish Parliament
in stockholm. She has received many awards. On 15 March 2019
approximately 14,00,000 people around the world, mainly students,
protested against climate change).
(viii) Use of public transport: Public transport is the system of buses, sharing
taxis, trains, etc. that run according to a series of planned times and that
anyone can use.
These public transport are economical, comfortable, rapid less pollutioin
and less road jam.
Government should extended the metro to the sub-urban areas as well.
This will cut the private vehicular traffic. India has 22 cars per 1000
individuals said by Niti Aayog, larger ratio of cars leads to more vehicular
pollution. Government should promote the use of public transport by
making laws relating to the protection of environment.
(Delhi government has also started odd-even scheme to reduce the traffic
jam and air pollution in New Delhi. Under the scheme the vehicles with odd
last digit in the registration number will be allowed on roads on odd dates
and these with even last digit will allowed on even dates. Voilation of this
rule is penalised upto Rs. 4000). Environment protection act 1986 is an
act of the parliament of India. In the wake of the Bhopal Gas Tragedy,
held on 3 December 1984.
Compare Development Experiences of India
and its Neighbours 10
Comparative development of India and its neighbours is an important
knowledge to possess as an Indian citizen.
As a rational citizen of a country, it is important to have a deep understanding
of the developments in your country as well as your neighbouring countries.
This understanding enables comparision of strengths and weaknesses of
yours as well as the neighbouring countries. Hence, it is important to study
the comparative development of India and its neighbours.
India, Pakistan and China are neighbouring countries. All these countries
are sharing boarder to each other. All these countries India, Pakistan
and China began towards their economic development at the same time.
In addition, India and Pakistan attained independence in the year 1947.
However, China was an independent economy in the year 1949 and soon
began working on raising public expenditure on social development.
In the post-cold war* world, nations have been primarily trying to adopt
various means which will strengthen their own domestic economies. To this
effect, they are also forming various regional and global economic groupings
such as SAARC, European Union, ASEAN, G-8, G-20, BRICS, etc.
* Cold war was a period (1947-1991) of geopolitical tension between the
Soviet Union with its satellite states, and the United States with its allies after
World War-II. The history of the conflict began between 1946 and 1947.
CHINA
China, officially the people’s Republic of China, is a country in East
Asia and is the World’s most populous country, with a population of
around 1.428 billion in 2017. Covering approximately 96,00,000 square
kilometers. It is the third largest country by area. It was established in
1949.
It’s official language is Mandarin. More than 70% of the Chinese
populatiion speaks Mandarin.
China Economy
China is one of the oldest civilization in the world, China has been the
world’s largest economy. After the establishment of people’s republic
of China under one-party rule, all the critical sectors of the economy,
enterprises and land owned and operated by individuals, were brought
under government control.
1. Great Leap Forward (GLF) Campaign: The great leap forward campaign
was a five-year plan of forced agricultural collectivization and rural
industrialization that was initiated by Mao to modernise China’s economy
in 1958. The aim of this camaign was to transform agrarian economy
(5)
into a modern economy through the process of rapid industrialisation.

→ Under this programme, people were encouraged to set up industries in
their backyards.
→ In rural areas, communes were started. Under the commune system,
people collectively cultivated lands.
→ In 1958 there were 26,000 communes, covering almost all the farm
population.
→ GLF campaign met with many problems about 30 to 55 million deaths by
starvation, execution, torture, forced labour and suicide out of depression.
2. Great Proletarian Cultural Revolution: In 1965, Mao introduced the
Great Proletarian Cultural Revolution (1966-76), under which students
and professionals were sent to work and learn from the country side.
However, when Russia had conflicts with China, it withdrew its
professionals, who had earlier been sent to China to help in the
industrialisation process.
3. Reforms Introduced in China: The present day fast industrial growth
in China can be traced back to the reforms introduced in 1978. China
introduced reforms in phases.
→ Initial Phase, reforms were initiated in agriculture, foreign trade and
investment sectors.
• In agriculture, commune lands were divided into small plots which were
allocated (only for use and not as ownership) to the individual households.
• They were allocated to keep all income from the land after paying
stipulated taxes.
→ In the later Phase, reforms were initiated in the industrial sector.
• Private sector firms, township and village enterprises (enterprises which
were owned and operated by local collectives) were allowed to produce
goods.
• At this stage, enterprises owned by government (known as state owned
enterprises or SOEs), were made to face competition.
4. Dual pricing in the reforms process: The reform process also
involved duel pricing. This means fixing the prices in two ways.
→ Farmers and industrial units were required to buy and sell quantities of
inputs and outputs on the basis of prices fixed by the government.
→ For other transactions, the inputs and outputs were purchased and sold
at market prices.
5. Special Economic Zones (SEZ): In order to attract foreign investors,
special economic zones were set up.
PAKISTAN
Pakistan, officially the islamic republic of Pakistan, is a country in South
Asia. It is the world’s fifth-most populous country with a population
exceeding 212.7 million people, gained independence on 14 August
1947. In 1971, a Civil War in East Pakistan resulted in the independence
COMPARE DEVELOPMENT EXPERIENCES OF INDIA AND ITS NEIGHBOURS 7
of bangladesh. It is the 33rd largest country spanning 8,81,913 square

kilometers. Its history has been characterized by periods of economic
growth, military rule and political instablity.
It has the second largest Muslim population in the world after Indonesia.
The national language is Urdu and English is the official language.
Pakistan Economy
1. Mixed Economic System: Pakistan follows the mixed economy model
with co-existence of public and private sectors.
2. Importance to role of public sector in early 1970s: In the early 1970s,
nationalisation of capital goods industries took place.
3. Importance to role of private sector in late 1970s: In the late 1970s,
there was a shift in the government policy, when it adopted the policy of
denationalisation. Government encouraged the private sector and also
offered various incentives to them. All this created a conductive climate
for new investments.
4. Financial support during late 1970s: During this period, Pakistan also
received financial support from: (i) Western nations; and (ii) remittances
from emigrants to the middle-east. This helped the country in stimulating
economic growth.
5. Green revolution: In case of agriculture, the introduction of green
revolution and increase in public investment in infrastructure led to a
rise in the production of food grains. This changed the agrarian economy
structure.
Comparative Study - India, China and Pakistan
The overall development of these 3 economies are broadly classified into
demographic indicators, gross domestic products, sectorial contributions
and human development indicators.
We shall now comparatively analyse the development of India, Pakistan
and China.
Demographic Indicators
The following table shows the demographic indicators of India, Pakistan
and China.
Country Population Annual Density Sex Fertility Urbani-
in 2015 growth of per sq.km Ratio Rate sation
poupulation (2015)
(2015)
India 131 crores 1.2 441 929 2.3 33
Pakistan 18.9 crores 2.1 245 947 3.7 39
China 137 crores 0.5 146 941 1.6 56
* Population: China is the most populous country in the world with 137
crore people and India is the second most populated country with 131
crore people. As compared to China and India, population of Pakistan is
very less 18.9 crore out of every six persons living in this world, one is
an Indian and another Chinese. The population of Pakistan is very small
and accounts for roughly about one-tenth of China or India.
* Growth Rate of Population: Though, China is the most populated
country, but its annual growth rate of population is the lowest (0.5%)
as compared to India (1.2%) and Pakistan (2.1%). The reson for the low
growth of population is the ‘one-child policy’ introduced in China in the
lode 1970s. One-child policy successfully reduced the growth rate but it
has a bad impact on sex ratiio.
* Density per square km: Density of population of China is low (146
persons per sq. km) as compared to India (441 persons per sq. km) and
Pakistan (245 persons per sq km).
* Sex ratio: Due to preference of son, sex ratio is low and biased against
female in all the three countries. Sex ratio is the lowest in India with
929 females per 1,000 males. In China and Pakistan, the corresponding
figures are 941 and 947.
* Fertility rate: It is calculated as the numebr of children borne by a
woman in the reprodutive age (15-45 years) on an average. Since the
introduction of the one-child policy, the fertility rate in China has fallen
from over 3 births per woman in 1980 to approximately 1.6 births.
Fertility rate is the highest in Pakistan at 3.7 births per woman and India
comes second with 2.3 births per woman.
* Urbanisation: highest urbanbisation is in China (56%). In India and
Pakistan, the figures are 33% and 39%.
GDP Growth Rate
When the economy is expanding, the GDP growth rate is positive. If it’s
growing, it shows more income generation in the economy. if it is negative,
then the country’s economy is in a recession.
China with second largest GDP, as measured by purchasing power parity
(PPP) is estimated to be 19.8 trillion dollar. India’s GDP (PPP) is 8.07
trillion and Pakistan’s GDP is about 12% of India’s GDP.
Annual Growth of GDP in Percent (1980-2015)
Country 1980-90 2011-15
India 5.7 6.7
Pakistan 6.3 4.0
China 10.3 7.9
(Purchasing power parity (PPP): It is an economic theory that allows

the comparison of the purchasing power of various world currencies to
one another. It is a theoretical exchange rate that allows you to buy the
same amount of goods and services in every country. PPP comparisions
are done by world bank in 2017, PPP, (US-India) was $1 = `17.73.
US dollar is the universally accepted currency. Therefore, GDP of different

countries are expressed in US dollars and called PPP ‘US $’).
Sectoral Contribution
In all the three economies, the industry and service sectors have less
proportion of workforce, but they contribute more in terms of output.
Sectoral Share of GDP and Employment (%) in 2014-14

Sector Contribution to GDP Distribution of Workforce
India China Pakistan India China Pakistan
Agriculture 17 9 25 50 28 43
Industry 30 43 21 21 29 23
Service 53 48 54 29 43 34
Total 100 100 100 100 100 100
AGRICULTURE (PRIMARY SECTOR)

in China
→ Due to topographic and climate conditions, the area suitable for cultivation
is just 10% of its total land area.
→ The total cultivable area in China accounts for 40% of the cultivable area
in India.
→ Till 1980, more than 80% of its population was dependent on farming at
their soul source of livelihood.
→ Since then, the government encouraged people to leave their fields and
pursue other activities, such as handicrafts, commerce and transport.
→ As a result, proportion of workforce engaged in agriculture reduced to
28%. In 2014-15, with contribution to GDP at 9%.
In India
The contribution of agriculture to GDP was 17%. The proportion of
workforce engaged in agriculture was 50%. India is the world’s largest
producer of pulses, rice, wheat, spices and spice product.
In Pakistan
The contribution of agriculture to GDP was same at 17%, but proportion
of workforce engaged in agriculture was 43%.
INDUSTRY (SECONDARY SECTOR)
Contribution to GDP
In China manufacturing and service sectors contribute the highest to
GDP at 43% and 48%. The availability of Chinese imports particularly in
the electronic market has seen strong growth in the country’s economy.
Whereas in India and Pakistan, it is the service sector which contributes
53% and 54%. In China, secondary sector contribution 43% to China’s
GDP, whereas in India and Pakistan the share of secondary sector was
30% and 21% respectively.
(In the last two decades, the contribution of agriculture sector to GDP,
which employs the largest proportion of workforce in all the three
countries, has declined. In the industrial sectcor, China has maintained
two digit growth rate whereas India and Pakistan growth rate has declined.
So China was able to contribute more in the manufacturing sector and
India is focusing growth of service sector but Pakistan has shown poor
performance in all the sectors)
SERVICE (TERTIARY SECTOR)
Contribution to GDP
→ In both India and Pakistan the service sector is emerging as a major
player of development.
Service sector contributes the highest to their GDP, with contribution of
53% in case of India and 54% for Pakistan.
→ The contribution of service sector to the GDP in China was 32%.
HUMAN DEVELOPMENT INDICATORS
Some selected indicators of human development, 2016
Items India China Pakistan
Human Development Index 0.624 0.738 0.550
(value)
Rank (Based on HDI) 131 91 148
Life Expectancy at Birth (years) 68.3 76 66.4
Mean years of schooling (% age 6.3 7.6 5.1
15 and above)
GDP per capita (PPP US $) 6,092 14,400 4,866
People below poverty line (at 37 32 44
$3.10 a day PPP) 2011
Infant mortality rate (per 1,000 38 9 66
live births)
Maternal mortality rate (per 1 174 27 178
lakh births)
Population using improved 40 77 64
sanitation (%)
Population with sustainable 94 96 91

access to improved water source
(%)
Percentage of undernourished 39 9 45
children
→ Human Development Index (HDI): It is a statistical tool used to measure

a country’s overall achievement in its social and economic dimensions.
The social and economic dimensions of a country are based on the health
of people, their level of education and their standard of living.
In 2016 HDI for India, China and Pakistan were estimated to be 0.624,
0.738 and 0.550 respectively.
According to their HDI, Global ranks accorded were found to be 131, 91
and 148 respectively.
→ Life Expectancy at Birth: Life expectancy refers to the average number
for which people are expected to live. A higher life expectancy indicates
longer and a more active average life span. China has the highest life
expectancy of 76 years. India and Pakistan have the life expectancy of
68.3 and 66.4 years respectively.
→ Mean years of schooling: Average number of years of education received
by people ages 15 and above. It is highest in case of China with 7.6%,
while the corresponding figures for India and Pakistan are 6.3% and 5.1
respectively.
→ GDP per capita (PPP US $): It is calculated by dividing GDP over a
country’s population. Higher ranking of China in HDI is mainly due to
higher GDP per capita. In 2016, China’s GDP per capita was estimated
to be US $ 14,400, while it was just US $ 6,092 for India and US $ 4,866
for Pakistan.
→ People below poverty line: The official level of income that is needed to
achieve a basic living standard with sufficient money for food, clothing,
and a place to live. For the proportion of people below the international
poverty rate of $ 3.10 a day, people below poverty line are 37%, 32% and
44% for India, China and Pakistan respectively.
→ Infant mortality rate: It refers to the number of infant dying before
reaching one year of age per 1,000 live births in a year, low infant mortality
rate shows better health and sanitation facilites as most of the infants
die due to unhygienic and insanitary environments. It is lowest in China
with 9 infants and highest in Pakistan with 66 infants, in India it is 38.
→ Maternal Mortality Rate: It refers to deaths due to complications from
pregnancy or childbirth.
In China, for one lakh births, only 27 women die, whereas in India and
Pakistan, maternal mortality rate is 174 and 178 respectively.
→ Population using improved sanitation: It refers to the percentage of

the population using improved sanitation facilities. In India it is very less
as 40% only and in China it is 77% in Pakistan it is 64%.
→ Population with sustainable Access to improved water source: It
refers to the percentage of population which has a reasonable access to
water (from tap, hand pump or protected well) and is able to obtain at
least 20 liters per person per day. China (96%) is ahead of India (94%)
and Pakistan (91%) in providing improved water sources.
→ Percentage of undernourished children: The percentage of population,
which is not able to obtain adequate diet, is termed as undernourished. In
India, 39% and in Pakistan, 45% of the population was undernourished.
Liberty indicators: These are those indicators which represents the

degree of civil and political freedom to individuals in a country.
Examples: Extent of democratic participation in social and political
decision making, the extent of constitutional protection of the
independence of the judiciary and the rule of law etc.
Human development index may be said to be incomplete unless such
indicators are included.
APPRAISAL OF DEVELOPMENT STRATEGIES

China
China did not have any compulsion to introduce reforms as dictated by
the World Bank and International Monetary Fund to India and Pakistan.
But, some adverse situations of the economy prior to 1978, forced China
to go for reforms.
Pre Reforms Period
• There had been massive extension of basic health services in rural areas.
• Through the commune system, there was more equitable distribution of
food grains.
• Despite extensive land reforms, collectivisation, the Great Leap Forward
and other initiatives, the per capita grain output in 1978 was the same
as it was in the mid 1950s.
In 1978, the then Government of China was not satisfied with the slow
pace of economy and lack of modernisation under the Maoist rule. They
felt that Maoist vision of economic development had failed. As a result, a
number of reform measures were introduced in 1978.
Post Reforms Period

The various reform measures led to rapid growth in China.
• Each reform measure was first implemented at a smaller level and then
extended on a massive scale.
• Development of infrastructural facilites in the areas of education and
health, land reforms, long existence of decentralised planning and
existence of small enterprises helped positively in improving the social
and income indicators.
• Agricultural reforms (handing over plots of land to individuals for
cultivation) brought prosperity to a vast number of poor people. It created
conditions for the subsequent phenomenal growth in rural industries
and built up a strong support base for more reforms.
Pakistan
In Pakistan, the reform process led to worsening of all the economic
indicators. As compared to 1980s, the growth rate of GDP and its sectoral
constituents decreased in 1990s. The proportion of poor in 1960s was
more than 40 per cent which declined to 25 per cent in 1980s and started
rising again in 1990s.
The reason for the slow-down of growth and re-emergence of poverty in
Pakistan’s economy are:
• Agricultural growth and food supply situation was based on good harvest
and not on institutionalised process of technical change. When there was
a good harvest, the economy was in good condition, when it was not , the
economic indicators showed stagnation or negative trends.
• Foreign exchange is an essential component for any country and it is
always preferred to build foreign exchange reserves through exports of
manufactured goods. However, in Pakistan, most of the foreign exchange
earnings came from remittances from Pakistani workers in the Middle-
east and the exports of highly volatile agricultural products.
• There was growing dependence on foreign loans on the one hand and
increasing difficulty in paying back the loans on the other.
However, during the last few years, Pakistan has recovered its economic
growth and has been sustaining. As per Annual Plan of 2016-17, GDP
registered a growth of 4.7% in 2015-16, highest when compared to the
previous eight years. While agriculture recorded growth rate far from
satisfactory level, industrial and service sectors grew at 6.8% and 5.7%
respectively. Many macroeconomic indicators also began to show stable
and positive trends.
Conclusions
India, China and Pakistan have travelled more than five decades of
developmental path with varied results. Til the late 1970s, all of them
were maintaining the same level of low development. The last three
decades have taken these countries to different levels.
India
• Indian economy performed moderately, but majority of its people still
depend on agriculture.
• Infrastructure is lacking in many parts of the country.
• It is yet to raise the standard of living of more than one-fourth of its
population that lives below the poverty line.
Pakistan
• Political instability, over-dependence on remittances and foreign aid
along with volatile performance of agriculture sector are the reasons for
the slowdown of the Pakistan economy.
• In the recent past, it is hoping to improve the situation by maintaiing
high rates of GDP growth.
• Many macroeconomic indicators began showing positive and higher
growth rates reflecting the economic recovery.
China
• In China, the lack of political freedom and its implications for human
rights are major concerns.
• However, in the last three decades, it used the ‘market system without
losing political commitment’ and succeeded in raising the level of growth
alongwith alleviation of poverty.
• China has used the market mechanism to create additional social and
economic opportunities.
• By retaining collective ownership of land and allowing individuals to
cultivate lands China has ensured social security in rural areas.
• Public intervention in providing social infrastructure brought positive
results in human development indicators in China.

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Indian Economy on the Eve of Independence

(iii) Low level of Productivity: It means output per hectare of land

III. Foreign Trade

Impact of Railways in India:

Objectives of Planning Commission to promote a rapid rise in the standard

(iv) Self-reliance: It means dependence on domesticaly produced goods

* These are the following measures taken by government to promote

Role of Public Sector in Industrial Development

effort of the state industries like fertilizers, aluminium, machine tool,

ELEMENT OF NEW ECONOMIC POLICY

regulator to facilitator of financial sector. Banks are free to set up new

Policy Strategies Promoting Globalisation

(iii) To ensure optimum utilisation of world resources.

2. Neglect rural area in growth process: LPG policies have resulted in

The poverty line divides the poor from the non-poor

Three Dimensions of Government approach to reduce poverty in India.

This scheme is being implemented on a cost sharing basis between the

this scheme on his first independence day speech on 15 August 2014.

of their parents, society and the government. By getting education

2. Bring Positive Change in Work Environment

Sources of Rural Credit

Institutional Sources: When credit is given by the Government approved

It is a process that involves assembling, storage, processing, transportation,

Problems faced by farmers

• Public distribution system (PDS): The public distribution system in

DIVERSIFICATION OF AGRICULTURAL ACTIVITIES

2. Dairying: It is the branch of agriculture which involves breeding, raising

(Yellow Revolution: It was launched in 1986-1987 to increase the

Benefits of Organic Farming

Low output: It has a lesser output in initial years as compared to Modern

Participation of People in Employment

• Education level: In rural areas, many do not go to schools or colleges and

Two types of wage employment are:

Male Workers Female Workers

Distribution of Employment by Region

Distribution of Employment in Different Sectors

At present, the Indian economy is passing through a tough time. But it is

Following figure shows the distribution of employment in different

Distribution of Rural-Urban employment in Different sectors

Employment in Rural Areas

Distribution of Employment (Male-Female) in Different Sectors

Distribution of Employment (Male-Female) in Different Sectors (2011-12)

From the given figure, the following conclusions are intepreted.

and service providing. percentage of people getting employment from

Around 70% of India’s population lives in villages. Agriculture is the

industries etc. These persons should be helped financially, providing

components of non-commercial energy it is generally used in the rural

Basis Conventional Sources Non-conventional

5. Examples Coal, natural gas, Solar power, wind

development of various sectors of the economy, the demand for power is

2. Underutilisation of Production Capacity: The utilisation of power

Power Distribution : The Case of Delhi

Saving Energy : Promoting the Case of Compact Fluorescent Lamps (CFL)

(life expectancy of female is greater than male. It shows the significant

Medical Tourism in India

Rural Urban Divide

The population of India has been growing at an unpredicted rate and

Consequences of global warming are: